Intrinsic value of Vodafone Group ADR - VOD

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$28.75

  Intrinsic Value

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  Value-price divergence*

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$28.75

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

We calculate the intrinsic value of VOD 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 2017), $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 75.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.38
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  50,271
  49,400
  50,536
  51,835
  53,293
  54,908
  56,681
  58,611
  60,701
  62,952
  65,368
  67,953
  70,711
  73,647
  76,768
  80,079
  83,589
  87,303
  91,232
  95,383
  99,765
  104,390
  109,266
  114,407
  119,823
  125,528
  131,534
  137,855
  144,508
  151,506
  158,867
Variable operating expenses, $m
 
  26,076
  26,611
  27,222
  27,908
  28,669
  29,503
  30,412
  31,395
  32,455
  33,592
  31,985
  33,283
  34,665
  36,134
  37,693
  39,345
  41,093
  42,942
  44,896
  46,959
  49,136
  51,431
  53,851
  56,400
  59,085
  61,912
  64,888
  68,019
  71,313
  74,778
Fixed operating expenses, $m
 
  22,256
  22,812
  23,383
  23,967
  24,566
  25,180
  25,810
  26,455
  27,117
  27,794
  28,489
  29,202
  29,932
  30,680
  31,447
  32,233
  33,039
  33,865
  34,711
  35,579
  36,469
  37,380
  38,315
  39,273
  40,255
  41,261
  42,293
  43,350
  44,434
  45,544
Total operating expenses, $m
  46,339
  48,332
  49,423
  50,605
  51,875
  53,235
  54,683
  56,222
  57,850
  59,572
  61,386
  60,474
  62,485
  64,597
  66,814
  69,140
  71,578
  74,132
  76,807
  79,607
  82,538
  85,605
  88,811
  92,166
  95,673
  99,340
  103,173
  107,181
  111,369
  115,747
  120,322
Operating income, $m
  3,931
  1,068
  1,113
  1,230
  1,417
  1,673
  1,997
  2,390
  2,850
  3,381
  3,981
  7,478
  8,226
  9,050
  9,954
  10,940
  12,011
  13,171
  14,425
  15,775
  17,227
  18,785
  20,455
  22,241
  24,150
  26,188
  28,360
  30,675
  33,139
  35,759
  38,545
EBITDA, $m
  3,931
  10,894
  11,100
  11,401
  11,795
  12,280
  12,856
  13,521
  14,278
  15,128
  16,071
  17,110
  18,249
  19,489
  20,835
  22,290
  23,859
  25,546
  27,356
  29,295
  31,368
  33,582
  35,943
  38,458
  41,135
  43,981
  47,005
  50,215
  53,622
  57,235
  61,064
Interest expense (income), $m
  1,334
  1,368
  1,418
  1,473
  1,537
  1,608
  1,687
  1,774
  1,868
  1,970
  2,080
  2,198
  2,324
  2,459
  2,602
  2,755
  2,917
  3,088
  3,269
  3,461
  3,664
  3,878
  4,104
  4,342
  4,593
  4,858
  5,137
  5,430
  5,739
  6,064
  6,406
Earnings before tax, $m
  2,947
  -300
  -305
  -243
  -120
  65
  310
  616
  983
  1,411
  1,902
  5,281
  5,902
  6,591
  7,351
  8,185
  9,094
  10,083
  11,155
  12,314
  13,563
  14,907
  16,351
  17,899
  19,557
  21,330
  23,224
  25,245
  27,400
  29,696
  32,139
Tax expense, $m
  5,028
  0
  0
  0
  0
  18
  84
  166
  265
  381
  513
  1,426
  1,593
  1,780
  1,985
  2,210
  2,455
  2,723
  3,012
  3,325
  3,662
  4,025
  4,415
  4,833
  5,280
  5,759
  6,270
  6,816
  7,398
  8,018
  8,678
Net income, $m
  -6,646
  -300
  -305
  -243
  -120
  48
  227
  450
  717
  1,030
  1,388
  3,855
  4,308
  4,812
  5,367
  5,975
  6,639
  7,361
  8,143
  8,989
  9,901
  10,882
  11,936
  13,066
  14,277
  15,571
  16,953
  18,429
  20,002
  21,678
  23,462

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15,784
  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
  163,257
  153,893
  157,432
  161,478
  166,021
  171,054
  176,577
  182,590
  189,100
  196,113
  203,639
  211,691
  220,282
  229,430
  239,152
  249,468
  260,401
  271,973
  284,211
  297,142
  310,795
  325,201
  340,394
  356,408
  373,281
  391,051
  409,762
  429,456
  450,179
  471,981
  494,914
Adjusted assets (=assets-cash), $m
  147,473
  153,893
  157,432
  161,478
  166,021
  171,054
  176,577
  182,590
  189,100
  196,113
  203,639
  211,691
  220,282
  229,430
  239,152
  249,468
  260,401
  271,973
  284,211
  297,142
  310,795
  325,201
  340,394
  356,408
  373,281
  391,051
  409,762
  429,456
  450,179
  471,981
  494,914
Revenue / Adjusted assets
  0.341
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
Average production assets, $m
  26,248
  44,114
  45,128
  46,288
  47,590
  49,033
  50,616
  52,340
  54,206
  56,216
  58,374
  60,682
  63,145
  65,767
  68,554
  71,511
  74,645
  77,962
  81,470
  85,177
  89,090
  93,220
  97,575
  102,165
  107,002
  112,096
  117,459
  123,105
  129,045
  135,295
  141,868
Working capital, $m
  -5,333
  -4,742
  -4,851
  -4,976
  -5,116
  -5,271
  -5,441
  -5,627
  -5,827
  -6,043
  -6,275
  -6,523
  -6,788
  -7,070
  -7,370
  -7,688
  -8,025
  -8,381
  -8,758
  -9,157
  -9,577
  -10,021
  -10,490
  -10,983
  -11,503
  -12,051
  -12,627
  -13,234
  -13,873
  -14,545
  -15,251
Total debt, $m
  49,155
  40,511
  42,097
  43,909
  45,944
  48,199
  50,673
  53,367
  56,284
  59,426
  62,797
  66,405
  70,254
  74,352
  78,707
  83,329
  88,227
  93,411
  98,894
  104,687
  110,803
  117,257
  124,063
  131,238
  138,797
  146,758
  155,140
  163,963
  173,247
  183,015
  193,288
Total liabilities, $m
  87,055
  68,944
  70,530
  72,342
  74,377
  76,632
  79,106
  81,800
  84,717
  87,859
  91,230
  94,838
  98,687
  102,785
  107,140
  111,762
  116,660
  121,844
  127,327
  133,120
  139,236
  145,690
  152,496
  159,671
  167,230
  175,191
  183,573
  192,396
  201,680
  211,448
  221,721
Total equity, $m
  76,201
  84,949
  86,903
  89,136
  91,644
  94,422
  97,470
  100,790
  104,383
  108,254
  112,409
  116,853
  121,596
  126,645
  132,012
  137,707
  143,741
  150,129
  156,885
  164,022
  171,559
  179,511
  187,897
  196,737
  206,051
  215,860
  226,189
  237,060
  248,499
  260,534
  273,192
Total liabilities and equity, $m
  163,256
  153,893
  157,433
  161,478
  166,021
  171,054
  176,576
  182,590
  189,100
  196,113
  203,639
  211,691
  220,283
  229,430
  239,152
  249,469
  260,401
  271,973
  284,212
  297,142
  310,795
  325,201
  340,393
  356,408
  373,281
  391,051
  409,762
  429,456
  450,179
  471,982
  494,913
Debt-to-equity ratio
  0.645
  0.480
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.610
  0.610
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
Adjusted equity ratio
  0.410
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6,646
  -300
  -305
  -243
  -120
  48
  227
  450
  717
  1,030
  1,388
  3,855
  4,308
  4,812
  5,367
  5,975
  6,639
  7,361
  8,143
  8,989
  9,901
  10,882
  11,936
  13,066
  14,277
  15,571
  16,953
  18,429
  20,002
  21,678
  23,462
Depreciation, amort., depletion, $m
  0
  9,826
  9,987
  10,171
  10,378
  10,607
  10,858
  11,132
  11,428
  11,747
  12,089
  9,632
  10,023
  10,439
  10,882
  11,351
  11,848
  12,375
  12,932
  13,520
  14,141
  14,797
  15,488
  16,217
  16,984
  17,793
  18,644
  19,540
  20,483
  21,475
  22,519
Funds from operations, $m
  30,022
  9,526
  9,682
  9,928
  10,258
  10,654
  11,085
  11,581
  12,145
  12,777
  13,478
  13,487
  14,331
  15,251
  16,248
  17,326
  18,487
  19,736
  21,075
  22,509
  24,042
  25,679
  27,424
  29,283
  31,261
  33,364
  35,598
  37,969
  40,485
  43,153
  45,981
Change in working capital, $m
  15,011
  -93
  -109
  -125
  -140
  -155
  -170
  -185
  -201
  -216
  -232
  -248
  -265
  -282
  -300
  -318
  -337
  -357
  -377
  -398
  -421
  -444
  -468
  -493
  -520
  -548
  -577
  -607
  -639
  -672
  -707
Cash from operations, $m
  15,011
  -3,325
  9,791
  10,052
  10,398
  10,810
  11,255
  11,767
  12,346
  12,993
  13,710
  13,735
  14,596
  15,533
  16,548
  17,644
  18,824
  20,092
  21,452
  22,908
  24,463
  26,123
  27,892
  29,777
  31,781
  33,911
  36,174
  38,576
  41,124
  43,825
  46,687
Maintenance CAPEX, $m
  0
  -6,868
  -7,002
  -7,163
  -7,347
  -7,554
  -7,783
  -8,034
  -8,308
  -8,604
  -8,923
  -9,266
  -9,632
  -10,023
  -10,439
  -10,882
  -11,351
  -11,848
  -12,375
  -12,932
  -13,520
  -14,141
  -14,797
  -15,488
  -16,217
  -16,984
  -17,793
  -18,644
  -19,540
  -20,483
  -21,475
New CAPEX, $m
  -9,352
  -844
  -1,015
  -1,160
  -1,302
  -1,443
  -1,583
  -1,724
  -1,866
  -2,010
  -2,157
  -2,308
  -2,463
  -2,622
  -2,787
  -2,957
  -3,134
  -3,317
  -3,508
  -3,707
  -3,914
  -4,130
  -4,355
  -4,590
  -4,837
  -5,094
  -5,363
  -5,645
  -5,940
  -6,250
  -6,574
Cash from investing activities, $m
  -8,890
  -7,712
  -8,017
  -8,323
  -8,649
  -8,997
  -9,366
  -9,758
  -10,174
  -10,614
  -11,080
  -11,574
  -12,095
  -12,645
  -13,226
  -13,839
  -14,485
  -15,165
  -15,883
  -16,639
  -17,434
  -18,271
  -19,152
  -20,078
  -21,054
  -22,078
  -23,156
  -24,289
  -25,480
  -26,733
  -28,049
Free cash flow, $m
  6,121
  -11,037
  1,774
  1,729
  1,749
  1,813
  1,889
  2,009
  2,172
  2,379
  2,629
  2,161
  2,501
  2,888
  3,322
  3,805
  4,339
  4,927
  5,569
  6,269
  7,029
  7,852
  8,741
  9,698
  10,728
  11,833
  13,018
  14,287
  15,643
  17,092
  18,638
Issuance/(repayment) of debt, $m
  -684
  1,421
  1,586
  1,813
  2,035
  2,255
  2,474
  2,694
  2,916
  3,142
  3,372
  3,607
  3,849
  4,098
  4,355
  4,622
  4,898
  5,184
  5,483
  5,793
  6,117
  6,454
  6,806
  7,174
  7,559
  7,961
  8,382
  8,823
  9,284
  9,767
  10,274
Issuance/(repurchase) of shares, $m
  26
  11,240
  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  
  -5,680
  12,661
  1,586
  1,813
  2,035
  2,255
  2,474
  2,694
  2,916
  3,142
  3,372
  3,607
  3,849
  4,098
  4,355
  4,622
  4,898
  5,184
  5,483
  5,793
  6,117
  6,454
  6,806
  7,174
  7,559
  7,961
  8,382
  8,823
  9,284
  9,767
  10,274
Total cash flow (excl. dividends), $m
  111
  -9,616
  3,360
  3,542
  3,784
  4,068
  4,363
  4,703
  5,088
  5,520
  6,001
  5,768
  6,350
  6,986
  7,677
  8,427
  9,237
  10,111
  11,052
  12,062
  13,146
  14,306
  15,547
  16,872
  18,287
  19,794
  21,400
  23,109
  24,927
  26,859
  28,912
Retained Cash Flow (-), $m
  11,742
  -1,624
  -1,954
  -2,233
  -2,507
  -2,778
  -3,048
  -3,320
  -3,593
  -3,871
  -4,155
  -4,445
  -4,743
  -5,050
  -5,367
  -5,695
  -6,035
  -6,388
  -6,755
  -7,138
  -7,536
  -7,952
  -8,386
  -8,840
  -9,314
  -9,809
  -10,328
  -10,871
  -11,439
  -12,035
  -12,659
Prev. year cash balance distribution, $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 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
 
  0
  1,406
  1,309
  1,276
  1,289
  1,314
  1,383
  1,495
  1,649
  1,846
  1,324
  1,608
  1,936
  2,311
  2,732
  3,202
  3,723
  4,297
  4,924
  5,609
  6,354
  7,161
  8,032
  8,973
  9,985
  11,072
  12,238
  13,488
  14,825
  16,253
Discount rate, %
 
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
 
  0
  1,257
  1,097
  997
  933
  875
  841
  823
  816
  814
  515
  547
  569
  580
  580
  566
  542
  507
  464
  416
  364
  311
  260
  212
  168
  131
  98
  72
  52
  36
Current shareholders' claim on cash, %
  100
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1
  87.1

Vodafone Group Plc operates as a telecommunications company worldwide. The company offers voice, messaging, and data services across mobile and fixed networks; broadband and TV services; cloud and hosting, as well as Internet protocol-virtual private network services; roaming services; and unified communications services. It also provides M-Pesa, a mobile money transfer and payment service; and Vodafone One, an ultra-high-speed fixed broadband service with Ono Fibre, home landline, 4G mobile telephony, and Vodafone TV. In addition, Vodafone Group Plc offers Internet of Things (IoT), which is communication between devices via mobile technologies; international voice transit and roaming; carrier services, such as fixed and mobile connectivity and other services; and smartphones and tablets. The company serves 462 million mobile, 13 million fixed broadband, and 9.5 million TV customers. It sells its products primarily through branded stores, distribution partners, and third party retailers. Vodafone Group Plc was founded in 1984 and is based in Newbury, the United Kingdom.

FINANCIAL RATIOS  of  Vodafone Group ADR (VOD)

Valuation Ratios
P/E Ratio -115.2
Price to Sales 15.2
Price to Book 10
Price to Tangible Book
Price to Cash Flow 51
Price to Free Cash Flow 135.3
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.2%
Cap. Spend. - 3 Yr. Gr. Rate 2.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 47.8%
Total Debt to Equity 64.5%
Interest Coverage 3
Management Effectiveness
Return On Assets -4.4%
Ret/ On Assets - 3 Yr. Avg. 8.9%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. -1.1%
Return On Equity -8.1%
Return On Equity - 3 Yr. Avg. -2.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 27.4%
Gross Margin - 3 Yr. Avg. 26.9%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 13.3%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 5%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 2.7%
Net Profit Margin -13.2%
Net Profit Margin - 3 Yr. Avg. -3.5%
Effective Tax Rate 170.6%
Eff/ Tax Rate - 3 Yr. Avg. -952.2%
Payout Ratio -59%

VOD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VOD stock intrinsic value calculation we used $48431 million for the last fiscal year's total revenue generated by Vodafone Group ADR. The default revenue input number comes from 2017 income statement of Vodafone Group 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 VOD stock valuation model: a) initial revenue growth rate of 2% 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 5.5%, whose default value for VOD is calculated based on our internal credit rating of Vodafone Group 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 Vodafone Group 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 VOD stock the variable cost ratio is equal to 52.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $21713 million in the base year in the intrinsic value calculation for VOD 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 Vodafone Group ADR.

Corporate tax rate of 27% is the nominal tax rate for Vodafone Group 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 VOD 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 VOD are equal to 89.3%.

Life of production assets of 6.3 years is the average useful life of capital assets used in Vodafone Group 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 VOD is equal to -9.6%. 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 - $83325 million for Vodafone Group 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 2631.62 million for Vodafone Group 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 Vodafone Group ADR at the current share price and the inputted number of shares is $75.7 billion.


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COMPANY NEWS

▶ ETFs with exposure to Vodafone Group Plc : June 20, 2017   [Jun-20-17 03:24PM  Capital Cube]
▶ What Is The Market Missing On Vodafone?   [Jun-16-17 09:26AM  Benzinga]
▶ How Vodafone Posted a $6.7 Billion Loss   [Jun-14-17 10:35AM  Market Realist]
▶ [$$] Political Campaigns Pull YouTube Ads Over Extremist Videos   [Jun-07-17 01:22PM  The Wall Street Journal]
▶ Kogan.com launching NBN services with Vodafone   [Jun-06-17 07:39PM  ZDNet]
▶ [$$] Consumers shun UK telecoms groups over higher prices   [Jun-04-17 07:59AM  Financial Times]
▶ NBN launches discounted individual CVC pricing   [May-31-17 10:57PM  ZDNet]
▶ Assessing Vodafone   [11:58AM  GuruFocus.com]
▶ [$$] Dividend Hunters Should Look Out for Vodafone   [12:24AM  The Wall Street Journal]
▶ Vodafone Stock Rises On Rosy Outlook For Cash, Dividends   [May-16-17 04:00PM  Investor's Business Daily]
▶ [$$] Dividend Hunters Should Look Out for Vodafone   [12:54PM  The Wall Street Journal]
▶ [$$] Vodafone: elephant in the room   [09:53AM  Financial Times]
▶ Stocks Up, Nasdaq Takes New High; China Techs, Home Depot Rise   [09:39AM  Investor's Business Daily]
▶ Vodafone, EasyJet weighed down by Brexit   [08:35AM  Reuters Videos]
▶ Home Sweet Home for the Billionaire Cable Cowboy   [May-09-17 08:15AM  Bloomberg]
▶ A High Dividend Opportunity or Value Trap?   [May-08-17 12:36PM  GuruFocus.com]
▶ Vodafone puts the call out for NBN customers   [May-02-17 04:27AM  ZDNet]
▶ Vodafone NZ and Sky push ahead with merger   [Apr-27-17 11:42PM  ZDNet]
▶ Ken Fisher Buys Vodafone   [Apr-25-17 03:23PM  GuruFocus.com]
▶ 2 Top Dividend Stocks in International Telecom   [Apr-12-17 06:31PM  Motley Fool]
Stock chart of VOD Financial statements of VOD Annual reports of VOD
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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