Intrinsic value of Vipshop Holdings ADR - VIPS

Previous Close

$9.86

  Intrinsic Value

$88.18

stock screener

  Rating & Target

str. buy

+794%

  Value-price divergence*

+115%

Previous close

$9.86

 
Intrinsic value

$88.18

 
Up/down potential

+794%

 
Rating

str. buy

 
Value-price divergence*

+115%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of VIPS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  40.77
  36.50
  33.35
  30.52
  27.96
  25.67
  23.60
  21.74
  20.07
  18.56
  17.20
  15.98
  14.89
  13.90
  13.01
  12.21
  11.49
  10.84
  10.25
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
Revenue, $m
  8,187
  11,175
  14,902
  19,450
  24,888
  31,277
  38,658
  47,062
  56,506
  66,993
  78,519
  91,069
  104,624
  119,163
  134,663
  151,100
  168,455
  186,710
  205,854
  225,880
  246,785
  268,576
  291,261
  314,860
  339,393
  364,890
  391,386
  418,921
  447,541
  477,296
  508,242
Variable operating expenses, $m
 
  10,715
  14,287
  18,645
  23,857
  29,979
  37,053
  45,108
  54,158
  64,209
  75,254
  87,276
  100,267
  114,201
  129,055
  144,807
  161,439
  178,934
  197,281
  216,472
  236,507
  257,390
  279,131
  301,746
  325,258
  349,693
  375,086
  401,474
  428,902
  457,418
  487,075
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  7,864
  10,715
  14,287
  18,645
  23,857
  29,979
  37,053
  45,108
  54,158
  64,209
  75,254
  87,276
  100,267
  114,201
  129,055
  144,807
  161,439
  178,934
  197,281
  216,472
  236,507
  257,390
  279,131
  301,746
  325,258
  349,693
  375,086
  401,474
  428,902
  457,418
  487,075
Operating income, $m
  323
  460
  615
  805
  1,031
  1,297
  1,605
  1,955
  2,348
  2,785
  3,265
  3,793
  4,357
  4,963
  5,608
  6,293
  7,016
  7,776
  8,573
  9,407
  10,278
  11,185
  12,130
  13,113
  14,135
  15,197
  16,300
  17,447
  18,639
  19,878
  21,167
EBITDA, $m
  469
  554
  738
  964
  1,233
  1,550
  1,915
  2,332
  2,800
  3,319
  3,890
  4,512
  5,184
  5,904
  6,672
  7,487
  8,346
  9,251
  10,200
  11,192
  12,228
  13,307
  14,431
  15,600
  16,816
  18,079
  19,392
  20,756
  22,174
  23,649
  25,182
Interest expense (income), $m
  0
  22
  51
  94
  146
  208
  280
  364
  460
  568
  687
  818
  961
  1,116
  1,281
  1,458
  1,645
  1,843
  2,050
  2,268
  2,497
  2,735
  2,983
  3,241
  3,510
  3,789
  4,080
  4,381
  4,695
  5,021
  5,360
Earnings before tax, $m
  386
  438
  564
  711
  886
  1,090
  1,324
  1,590
  1,888
  2,217
  2,578
  2,974
  3,396
  3,847
  4,327
  4,835
  5,371
  5,933
  6,523
  7,139
  7,781
  8,451
  9,148
  9,872
  10,625
  11,407
  12,221
  13,066
  13,944
  14,857
  15,807
Tax expense, $m
  87
  118
  152
  192
  239
  294
  358
  429
  510
  599
  696
  803
  917
  1,039
  1,168
  1,306
  1,450
  1,602
  1,761
  1,927
  2,101
  2,282
  2,470
  2,665
  2,869
  3,080
  3,300
  3,528
  3,765
  4,011
  4,268
Net income, $m
  295
  320
  412
  519
  646
  795
  967
  1,161
  1,378
  1,619
  1,882
  2,171
  2,479
  2,808
  3,159
  3,530
  3,921
  4,331
  4,762
  5,211
  5,680
  6,169
  6,678
  7,207
  7,756
  8,327
  8,921
  9,538
  10,179
  10,846
  11,539

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  692
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,630
  4,040
  5,388
  7,032
  8,998
  11,307
  13,976
  17,015
  20,429
  24,220
  28,387
  32,924
  37,825
  43,082
  48,685
  54,628
  60,902
  67,502
  74,423
  81,663
  89,221
  97,099
  105,301
  113,832
  122,702
  131,920
  141,499
  151,454
  161,801
  172,558
  183,746
Adjusted assets (=assets-cash), $m
  2,938
  4,040
  5,388
  7,032
  8,998
  11,307
  13,976
  17,015
  20,429
  24,220
  28,387
  32,924
  37,825
  43,082
  48,685
  54,628
  60,902
  67,502
  74,423
  81,663
  89,221
  97,099
  105,301
  113,832
  122,702
  131,920
  141,499
  151,454
  161,801
  172,558
  183,746
Revenue / Adjusted assets
  2.787
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
  2.766
Average production assets, $m
  643
  883
  1,177
  1,537
  1,966
  2,471
  3,054
  3,718
  4,464
  5,292
  6,203
  7,194
  8,265
  9,414
  10,638
  11,937
  13,308
  14,750
  16,262
  17,845
  19,496
  21,217
  23,010
  24,874
  26,812
  28,826
  30,920
  33,095
  35,356
  37,706
  40,151
Working capital, $m
  -1
  -950
  -1,267
  -1,653
  -2,116
  -2,659
  -3,286
  -4,000
  -4,803
  -5,694
  -6,674
  -7,741
  -8,893
  -10,129
  -11,446
  -12,844
  -14,319
  -15,870
  -17,498
  -19,200
  -20,977
  -22,829
  -24,757
  -26,763
  -28,848
  -31,016
  -33,268
  -35,608
  -38,041
  -40,570
  -43,201
Total debt, $m
  634
  1,469
  2,682
  4,162
  5,931
  8,010
  10,412
  13,146
  16,219
  19,631
  23,381
  27,465
  31,876
  36,606
  41,650
  46,998
  52,645
  58,585
  64,814
  71,330
  78,132
  85,222
  92,604
  100,282
  108,265
  116,561
  125,182
  134,141
  143,454
  153,135
  163,205
Total liabilities, $m
  2,801
  3,636
  4,849
  6,329
  8,098
  10,177
  12,579
  15,313
  18,386
  21,798
  25,548
  29,632
  34,043
  38,773
  43,817
  49,165
  54,812
  60,752
  66,981
  73,497
  80,299
  87,389
  94,771
  102,449
  110,432
  118,728
  127,349
  136,308
  145,621
  155,302
  165,372
Total equity, $m
  829
  404
  539
  703
  900
  1,131
  1,398
  1,701
  2,043
  2,422
  2,839
  3,292
  3,783
  4,308
  4,869
  5,463
  6,090
  6,750
  7,442
  8,166
  8,922
  9,710
  10,530
  11,383
  12,270
  13,192
  14,150
  15,145
  16,180
  17,256
  18,375
Total liabilities and equity, $m
  3,630
  4,040
  5,388
  7,032
  8,998
  11,308
  13,977
  17,014
  20,429
  24,220
  28,387
  32,924
  37,826
  43,081
  48,686
  54,628
  60,902
  67,502
  74,423
  81,663
  89,221
  97,099
  105,301
  113,832
  122,702
  131,920
  141,499
  151,453
  161,801
  172,558
  183,747
Debt-to-equity ratio
  0.765
  3.640
  4.980
  5.920
  6.590
  7.080
  7.450
  7.730
  7.940
  8.110
  8.240
  8.340
  8.430
  8.500
  8.550
  8.600
  8.640
  8.680
  8.710
  8.730
  8.760
  8.780
  8.790
  8.810
  8.820
  8.840
  8.850
  8.860
  8.870
  8.870
  8.880
Adjusted equity ratio
  0.047
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  295
  320
  412
  519
  646
  795
  967
  1,161
  1,378
  1,619
  1,882
  2,171
  2,479
  2,808
  3,159
  3,530
  3,921
  4,331
  4,762
  5,211
  5,680
  6,169
  6,678
  7,207
  7,756
  8,327
  8,921
  9,538
  10,179
  10,846
  11,539
Depreciation, amort., depletion, $m
  146
  94
  123
  159
  202
  252
  311
  377
  452
  535
  626
  719
  827
  941
  1,064
  1,194
  1,331
  1,475
  1,626
  1,784
  1,950
  2,122
  2,301
  2,487
  2,681
  2,883
  3,092
  3,309
  3,536
  3,771
  4,015
Funds from operations, $m
  248
  413
  535
  678
  848
  1,048
  1,277
  1,538
  1,830
  2,153
  2,507
  2,891
  3,306
  3,750
  4,223
  4,723
  5,251
  5,806
  6,388
  6,996
  7,630
  8,291
  8,979
  9,694
  10,437
  11,210
  12,013
  12,847
  13,715
  14,616
  15,554
Change in working capital, $m
  -162
  -254
  -317
  -387
  -462
  -543
  -627
  -714
  -803
  -891
  -980
  -1,067
  -1,152
  -1,236
  -1,317
  -1,397
  -1,475
  -1,552
  -1,627
  -1,702
  -1,777
  -1,852
  -1,928
  -2,006
  -2,085
  -2,167
  -2,252
  -2,340
  -2,433
  -2,529
  -2,630
Cash from operations, $m
  410
  667
  851
  1,064
  1,311
  1,591
  1,905
  2,252
  2,633
  3,044
  3,487
  3,958
  4,458
  4,986
  5,540
  6,121
  6,727
  7,358
  8,015
  8,698
  9,407
  10,143
  10,907
  11,700
  12,523
  13,377
  14,265
  15,188
  16,147
  17,146
  18,185
Maintenance CAPEX, $m
  0
  -64
  -88
  -118
  -154
  -197
  -247
  -305
  -372
  -446
  -529
  -620
  -719
  -827
  -941
  -1,064
  -1,194
  -1,331
  -1,475
  -1,626
  -1,784
  -1,950
  -2,122
  -2,301
  -2,487
  -2,681
  -2,883
  -3,092
  -3,309
  -3,536
  -3,771
New CAPEX, $m
  -328
  -240
  -294
  -359
  -430
  -505
  -583
  -664
  -746
  -829
  -911
  -991
  -1,071
  -1,149
  -1,224
  -1,299
  -1,371
  -1,442
  -1,512
  -1,582
  -1,652
  -1,721
  -1,792
  -1,864
  -1,938
  -2,014
  -2,093
  -2,175
  -2,261
  -2,351
  -2,445
Cash from investing activities, $m
  -241
  -304
  -382
  -477
  -584
  -702
  -830
  -969
  -1,118
  -1,275
  -1,440
  -1,611
  -1,790
  -1,976
  -2,165
  -2,363
  -2,565
  -2,773
  -2,987
  -3,208
  -3,436
  -3,671
  -3,914
  -4,165
  -4,425
  -4,695
  -4,976
  -5,267
  -5,570
  -5,887
  -6,216
Free cash flow, $m
  169
  363
  469
  587
  727
  890
  1,075
  1,283
  1,515
  1,770
  2,047
  2,346
  2,668
  3,011
  3,374
  3,758
  4,162
  4,585
  5,028
  5,490
  5,971
  6,472
  6,993
  7,535
  8,097
  8,682
  9,289
  9,921
  10,577
  11,259
  11,969
Issuance/(repayment) of debt, $m
  -13
  835
  1,213
  1,480
  1,770
  2,079
  2,402
  2,735
  3,073
  3,412
  3,750
  4,083
  4,411
  4,731
  5,043
  5,348
  5,647
  5,940
  6,229
  6,516
  6,802
  7,090
  7,381
  7,678
  7,983
  8,296
  8,621
  8,959
  9,312
  9,682
  10,069
Issuance/(repurchase) of shares, $m
  -28
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -57
  835
  1,213
  1,480
  1,770
  2,079
  2,402
  2,735
  3,073
  3,412
  3,750
  4,083
  4,411
  4,731
  5,043
  5,348
  5,647
  5,940
  6,229
  6,516
  6,802
  7,090
  7,381
  7,678
  7,983
  8,296
  8,621
  8,959
  9,312
  9,682
  10,069
Total cash flow (excl. dividends), $m
  114
  1,199
  1,681
  2,067
  2,497
  2,968
  3,476
  4,018
  4,588
  5,182
  5,797
  6,429
  7,078
  7,741
  8,417
  9,106
  9,809
  10,525
  11,257
  12,006
  12,773
  13,562
  14,374
  15,213
  16,080
  16,978
  17,911
  18,880
  19,889
  20,941
  22,039
Retained Cash Flow (-), $m
  -317
  -246
  -135
  -164
  -197
  -231
  -267
  -304
  -341
  -379
  -417
  -454
  -490
  -526
  -560
  -594
  -627
  -660
  -692
  -724
  -756
  -788
  -820
  -853
  -887
  -922
  -958
  -995
  -1,035
  -1,076
  -1,119
Prev. year cash balance distribution, $m
 
  671
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,623
  1,547
  1,903
  2,300
  2,737
  3,210
  3,714
  4,246
  4,803
  5,381
  5,976
  6,588
  7,216
  7,857
  8,512
  9,181
  9,865
  10,565
  11,282
  12,017
  12,774
  13,554
  14,360
  15,193
  16,056
  16,953
  17,884
  18,854
  19,865
  20,920
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,556
  1,416
  1,656
  1,894
  2,122
  2,329
  2,509
  2,654
  2,759
  2,821
  2,838
  2,811
  2,744
  2,638
  2,499
  2,333
  2,146
  1,946
  1,737
  1,527
  1,321
  1,125
  941
  774
  625
  495
  384
  292
  217
  158
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Vipshop Holdings Limited, through its subsidiaries, operates as an online discount retailer for various brands in the People's Republic of China. It offers a range of branded products, including women's apparel, such as casual wear, jeans, dresses, outerwear, swimsuits, lingerie, pajamas, and maternity clothes; men's apparel comprising casual and smart-casual T-shirts, polo shirts, jackets, pants, and underwear; women and men shoes for casual and formal occasions; and accessories consisting of belts, fashionable jewelry, watches, and glasses for women and men. The company also provides handbags, such as purses, satchels, duffel bags, and wallets; apparel, gear and accessories, furnishings and decor, toys, and games for boys, girls, infants, and toddlers of all age groups; sports apparel, and sports gear, and footwear for tennis, badminton, soccer, and swimming; and skin care and cosmetic products, including cleansers, lotions, face and body creams, face masks, sunscreen, foundations, lipsticks, eye shadows, and nail polish. In addition, it offers home furnishing products comprising bedding and bath products, home decors, and dining and tabletop items; small household appliances; designer apparel, footwear and accessories; and snacks, health supplements, and occasion-based gifts, such as chocolates, moon-cakes, and tea. Further, the company provides consumer financing, supply chain financing, and wealth management services. The company provides its branded products through its vipshop.com, vip.com, and lefeng.com Websites, as well as through its cellular phone application. Vipshop Holdings Limited was founded in 2008 and is headquartered in Guangzhou, the People's Republic of China.

FINANCIAL RATIOS  of  Vipshop Holdings ADR (VIPS)

Valuation Ratios
P/E Ratio 3.9
Price to Sales 0.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 14.2
Growth Rates
Sales Growth Rate 40.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -11.4%
Cap. Spend. - 3 Yr. Gr. Rate 64.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 76.5%
Total Debt to Equity 76.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 9%
Ret/ On Assets - 3 Yr. Avg. 8.2%
Return On Total Capital 22.9%
Ret/ On T. Cap. - 3 Yr. Avg. 22.1%
Return On Equity 44%
Return On Equity - 3 Yr. Avg. 45.3%
Asset Turnover 2.5
Profitability Ratios
Gross Margin 24%
Gross Margin - 3 Yr. Avg. 24.5%
EBITDA Margin 6.5%
EBITDA Margin - 3 Yr. Avg. 6.4%
Operating Margin 3.9%
Oper. Margin - 3 Yr. Avg. 3.7%
Pre-Tax Margin 4.7%
Pre-Tax Margin - 3 Yr. Avg. 4.8%
Net Profit Margin 3.6%
Net Profit Margin - 3 Yr. Avg. 3.7%
Effective Tax Rate 22.5%
Eff/ Tax Rate - 3 Yr. Avg. 22.7%
Payout Ratio 0%

VIPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VIPS stock intrinsic value calculation we used $8187 million for the last fiscal year's total revenue generated by Vipshop Holdings ADR. The default revenue input number comes from 2016 income statement of Vipshop Holdings ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our VIPS stock valuation model: a) initial revenue growth rate of 36.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for VIPS is calculated based on our internal credit rating of Vipshop Holdings ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Vipshop Holdings ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of VIPS stock the variable cost ratio is equal to 95.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for VIPS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Vipshop Holdings ADR.

Corporate tax rate of 27% is the nominal tax rate for Vipshop Holdings ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the VIPS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for VIPS are equal to 7.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Vipshop Holdings ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for VIPS is equal to -8.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $829 million for Vipshop Holdings ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 585.065 million for Vipshop Holdings ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Vipshop Holdings ADR at the current share price and the inputted number of shares is $5.8 billion.

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COMPANY NEWS

▶ Vipshop Stock Doesn't Earn Its Way Out of Its Slump   [Aug-16-17 08:11PM  Motley Fool]
▶ Vipshop Stock Has a Lot to Prove on Wednesday   [Aug-12-17 10:00AM  Motley Fool]
▶ [$$] Alibaba, JD Battle Pressures Margins   [Jul-20-17 11:08AM  Barrons.com]
▶ The options market: Buy this stock!   [Jul-19-17 01:44PM  CNBC Videos]
▶ China E-Commerce Sales A Positive Barometer For Alibaba, JD.com   [Jul-18-17 04:18PM  Investor's Business Daily]
▶ Get bullish on these three stocks   [01:55PM  CNBC Videos]
▶ Vipshop Stock Keeps Winning Streaks Alive   [May-16-17 03:04PM  Motley Fool]
▶ Vipshop, SINA, and Weibo Have a Lot to Prove This Week   [May-14-17 09:16AM  Motley Fool]
▶ Vipshop to Announce First Quarter 2017 Financial Results   [May-08-17 08:00AM  PR Newswire]
▶ Vipshop Stock: Next Stop, $17?   [Mar-23-17 12:45PM  Motley Fool]
▶ Vipshop Stock: Next Stop, $17?   [12:45PM  at Motley Fool]
▶ Alibaba, Tencent to Get Most of China Fintech Mkt.   [Mar-15-17 05:48PM  Investopedia]
▶ Vipshop Announces Entry into Facility Agreement   [Mar-07-17 06:00AM  PR Newswire]
▶ Vipshop Stock Has a Lot to Prove on Monday   [Feb-18-17 11:00AM  at Motley Fool]
▶ [$$] Here's 6 Asian Internet Stocks to Buy in 2017   [Dec-28-16 11:26PM  at Barrons.com]
▶ Why Vipshop Can Meet Q4 Expectations   [09:38AM  at Barrons.com]
▶ Tencent Tops Ranking Of China's Best Employers   [Dec-11-16 08:33AM  at Forbes]
▶ Is News Corp (NWSA) a Good Stock To Buy?   [Nov-30-16 04:47PM  at Insider Monkey]
▶ Is Dominos Pizza, Inc. (DPZ) a Good Stock To Buy?   [03:14PM  at Insider Monkey]
▶ Why Vipshop Holdings Shares Plunged Today   [12:26PM  at Motley Fool]
▶ Vipshop Stock Fails to Live Up to the Hype   [09:07AM  at Motley Fool]
▶ Vipshop Tumbles On Q3 Margin Miss   [Nov-21-16 08:23PM  at Barrons.com]
▶ Biggest Winner From Singles' Day? Vipshop! Deutsche Upgrade   [Nov-10-16 07:53PM  at Barrons.com]
▶ Vipshop to Announce Third Quarter 2016 Financial Results   [Nov-09-16 08:00AM  PR Newswire]
▶ Tiger Pacific Capitals Bets on China Lead to Big Q3   [Nov-07-16 02:34PM  at Insider Monkey]
▶ 2016 Forbes China Rich List (Full List)   [Oct-29-16 07:58AM  at Forbes]
▶ 3 Highest Growth Stocks on the Market Today   [Oct-27-16 07:07PM  at Motley Fool]
Stock chart of VIPS Financial statements of VIPS
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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