Intrinsic value of Vodafone Group ADR - VOD

Previous Close

$28.56

  Intrinsic Value

$11.92

stock screener

  Rating & Target

str. sell

-58%

  Value-price divergence*

-32%

Previous close

$28.56

 
Intrinsic value

$11.92

 
Up/down potential

-58%

 
Rating

str. sell

 
Value-price divergence*

-32%

*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 75.2

 

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
  51,276
  52,456
  53,804
  55,317
  56,994
  58,835
  60,838
  63,007
  65,344
  67,852
  70,534
  73,397
  76,445
  79,684
  83,122
  86,764
  90,620
  94,698
  99,006
  103,556
  108,356
  113,418
  118,754
  124,375
  130,297
  136,531
  143,093
  149,998
  157,262
  164,903
Variable operating expenses, $m
 
  49,835
  50,917
  52,152
  53,540
  55,077
  56,764
  58,601
  60,589
  62,731
  65,030
  64,660
  67,284
  70,079
  73,048
  76,199
  79,538
  83,073
  86,811
  90,761
  94,931
  99,331
  103,972
  108,863
  114,017
  119,445
  125,160
  131,176
  137,505
  144,165
  151,169
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
  46,339
  49,835
  50,917
  52,152
  53,540
  55,077
  56,764
  58,601
  60,589
  62,731
  65,030
  64,660
  67,284
  70,079
  73,048
  76,199
  79,538
  83,073
  86,811
  90,761
  94,931
  99,331
  103,972
  108,863
  114,017
  119,445
  125,160
  131,176
  137,505
  144,165
  151,169
Operating income, $m
  3,931
  1,441
  1,539
  1,652
  1,778
  1,917
  2,071
  2,237
  2,418
  2,613
  2,821
  5,874
  6,113
  6,367
  6,636
  6,923
  7,226
  7,547
  7,887
  8,246
  8,624
  9,024
  9,446
  9,890
  10,358
  10,851
  11,371
  11,917
  12,492
  13,097
  13,734
EBITDA, $m
  3,931
  6,947
  7,107
  7,290
  7,495
  7,722
  7,971
  8,243
  8,536
  8,853
  9,193
  9,556
  9,944
  10,357
  10,796
  11,262
  11,755
  12,278
  12,830
  13,414
  14,030
  14,680
  15,366
  16,089
  16,851
  17,653
  18,498
  19,387
  20,322
  21,306
  22,342
Interest expense (income), $m
  1,334
  1,275
  1,326
  1,387
  1,457
  1,535
  1,622
  1,717
  1,821
  1,933
  2,054
  2,183
  2,322
  2,470
  2,628
  2,796
  2,973
  3,162
  3,361
  3,572
  3,795
  4,030
  4,279
  4,541
  4,817
  5,107
  5,414
  5,736
  6,076
  6,433
  6,809
Earnings before tax, $m
  2,947
  166
  213
  265
  321
  382
  449
  520
  597
  680
  768
  3,691
  3,791
  3,896
  4,008
  4,127
  4,253
  4,385
  4,525
  4,673
  4,829
  4,994
  5,167
  5,350
  5,542
  5,744
  5,957
  6,181
  6,417
  6,664
  6,925
Tax expense, $m
  5,028
  45
  58
  71
  87
  103
  121
  141
  161
  184
  207
  997
  1,023
  1,052
  1,082
  1,114
  1,148
  1,184
  1,222
  1,262
  1,304
  1,348
  1,395
  1,444
  1,496
  1,551
  1,608
  1,669
  1,732
  1,799
  1,870
Net income, $m
  -6,646
  121
  156
  193
  234
  279
  328
  380
  436
  496
  560
  2,694
  2,767
  2,844
  2,926
  3,013
  3,104
  3,201
  3,304
  3,412
  3,525
  3,645
  3,772
  3,905
  4,045
  4,193
  4,349
  4,512
  4,684
  4,865
  5,055

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
  150,371
  153,829
  157,783
  162,221
  167,139
  172,535
  178,411
  184,772
  191,624
  198,978
  206,846
  215,241
  224,179
  233,679
  243,759
  254,441
  265,749
  277,707
  290,341
  303,682
  317,758
  332,603
  348,251
  364,737
  382,101
  400,384
  419,627
  439,876
  461,179
  483,586
Adjusted assets (=assets-cash), $m
  147,473
  150,371
  153,829
  157,783
  162,221
  167,139
  172,535
  178,411
  184,772
  191,624
  198,978
  206,846
  215,241
  224,179
  233,679
  243,759
  254,441
  265,749
  277,707
  290,341
  303,682
  317,758
  332,603
  348,251
  364,737
  382,101
  400,384
  419,627
  439,876
  461,179
  483,586
Revenue / Adjusted assets
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
Average production assets, $m
  26,248
  26,766
  27,382
  28,086
  28,876
  29,751
  30,712
  31,758
  32,890
  34,110
  35,419
  36,819
  38,313
  39,904
  41,595
  43,390
  45,291
  47,304
  49,432
  51,681
  54,056
  56,562
  59,204
  61,989
  64,924
  68,015
  71,269
  74,694
  78,299
  82,091
  86,079
Working capital, $m
  -5,333
  -5,128
  -5,246
  -5,380
  -5,532
  -5,699
  -5,883
  -6,084
  -6,301
  -6,534
  -6,785
  -7,053
  -7,340
  -7,645
  -7,968
  -8,312
  -8,676
  -9,062
  -9,470
  -9,901
  -10,356
  -10,836
  -11,342
  -11,875
  -12,438
  -13,030
  -13,653
  -14,309
  -15,000
  -15,726
  -16,490
Total debt, $m
  49,155
  37,886
  39,629
  41,621
  43,858
  46,337
  49,057
  52,018
  55,224
  58,678
  62,384
  66,349
  70,580
  75,085
  79,873
  84,953
  90,337
  96,036
  102,063
  108,431
  115,155
  122,249
  129,731
  137,617
  145,927
  154,678
  163,892
  173,591
  183,796
  194,533
  205,827
Total liabilities, $m
  87,055
  75,787
  77,530
  79,522
  81,759
  84,238
  86,958
  89,919
  93,125
  96,579
  100,285
  104,250
  108,481
  112,986
  117,774
  122,854
  128,238
  133,937
  139,964
  146,332
  153,056
  160,150
  167,632
  175,518
  183,828
  192,579
  201,793
  211,492
  221,697
  232,434
  243,728
Total equity, $m
  76,201
  74,584
  76,299
  78,260
  80,462
  82,901
  85,578
  88,492
  91,647
  95,046
  98,693
  102,596
  106,759
  111,193
  115,905
  120,904
  126,203
  131,811
  137,742
  144,009
  150,626
  157,608
  164,971
  172,732
  180,910
  189,522
  198,590
  208,135
  218,178
  228,745
  239,859
Total liabilities and equity, $m
  163,256
  150,371
  153,829
  157,782
  162,221
  167,139
  172,536
  178,411
  184,772
  191,625
  198,978
  206,846
  215,240
  224,179
  233,679
  243,758
  254,441
  265,748
  277,706
  290,341
  303,682
  317,758
  332,603
  348,250
  364,738
  382,101
  400,383
  419,627
  439,875
  461,179
  483,587
Debt-to-equity ratio
  0.645
  0.510
  0.520
  0.530
  0.550
  0.560
  0.570
  0.590
  0.600
  0.620
  0.630
  0.650
  0.660
  0.680
  0.690
  0.700
  0.720
  0.730
  0.740
  0.750
  0.760
  0.780
  0.790
  0.800
  0.810
  0.820
  0.830
  0.830
  0.840
  0.850
  0.860
Adjusted equity ratio
  0.410
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496
  0.496

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6,646
  121
  156
  193
  234
  279
  328
  380
  436
  496
  560
  2,694
  2,767
  2,844
  2,926
  3,013
  3,104
  3,201
  3,304
  3,412
  3,525
  3,645
  3,772
  3,905
  4,045
  4,193
  4,349
  4,512
  4,684
  4,865
  5,055
Depreciation, amort., depletion, $m
  0
  5,506
  5,568
  5,638
  5,717
  5,805
  5,901
  6,005
  6,118
  6,240
  6,371
  3,682
  3,831
  3,990
  4,160
  4,339
  4,529
  4,730
  4,943
  5,168
  5,406
  5,656
  5,920
  6,199
  6,492
  6,801
  7,127
  7,469
  7,830
  8,209
  8,608
Funds from operations, $m
  30,022
  5,627
  5,723
  5,831
  5,951
  6,084
  6,228
  6,385
  6,554
  6,737
  6,932
  6,376
  6,598
  6,835
  7,086
  7,352
  7,634
  7,932
  8,247
  8,580
  8,931
  9,302
  9,692
  10,104
  10,538
  10,995
  11,475
  11,982
  12,514
  13,074
  13,663
Change in working capital, $m
  15,011
  -101
  -118
  -135
  -151
  -168
  -184
  -200
  -217
  -234
  -251
  -268
  -286
  -305
  -324
  -344
  -364
  -386
  -408
  -431
  -455
  -480
  -506
  -534
  -562
  -592
  -623
  -656
  -691
  -726
  -764
Cash from operations, $m
  15,011
  5,728
  5,841
  5,966
  6,103
  6,251
  6,412
  6,585
  6,771
  6,970
  7,182
  6,645
  6,885
  7,140
  7,410
  7,695
  7,998
  8,317
  8,655
  9,011
  9,386
  9,782
  10,199
  10,638
  11,100
  11,587
  12,099
  12,638
  13,204
  13,801
  14,427
Maintenance CAPEX, $m
  0
  -2,625
  -2,677
  -2,738
  -2,809
  -2,888
  -2,975
  -3,071
  -3,176
  -3,289
  -3,411
  -3,542
  -3,682
  -3,831
  -3,990
  -4,160
  -4,339
  -4,529
  -4,730
  -4,943
  -5,168
  -5,406
  -5,656
  -5,920
  -6,199
  -6,492
  -6,801
  -7,127
  -7,469
  -7,830
  -8,209
New CAPEX, $m
  -9,352
  -519
  -616
  -704
  -790
  -875
  -961
  -1,046
  -1,132
  -1,220
  -1,309
  -1,400
  -1,494
  -1,591
  -1,691
  -1,794
  -1,901
  -2,013
  -2,129
  -2,249
  -2,375
  -2,506
  -2,642
  -2,785
  -2,935
  -3,091
  -3,254
  -3,425
  -3,604
  -3,792
  -3,989
Cash from investing activities, $m
  -8,890
  -3,144
  -3,293
  -3,442
  -3,599
  -3,763
  -3,936
  -4,117
  -4,308
  -4,509
  -4,720
  -4,942
  -5,176
  -5,422
  -5,681
  -5,954
  -6,240
  -6,542
  -6,859
  -7,192
  -7,543
  -7,912
  -8,298
  -8,705
  -9,134
  -9,583
  -10,055
  -10,552
  -11,073
  -11,622
  -12,198
Free cash flow, $m
  6,121
  2,584
  2,549
  2,524
  2,504
  2,488
  2,476
  2,468
  2,463
  2,462
  2,463
  1,702
  1,708
  1,717
  1,728
  1,742
  1,757
  1,775
  1,796
  1,818
  1,843
  1,870
  1,900
  1,932
  1,966
  2,004
  2,043
  2,086
  2,131
  2,179
  2,230
Issuance/(repayment) of debt, $m
  -684
  1,450
  1,743
  1,993
  2,237
  2,479
  2,720
  2,962
  3,206
  3,454
  3,706
  3,965
  4,231
  4,505
  4,788
  5,080
  5,384
  5,699
  6,027
  6,368
  6,724
  7,095
  7,482
  7,886
  8,309
  8,751
  9,214
  9,699
  10,206
  10,737
  11,293
Issuance/(repurchase) of shares, $m
  26
  1,327
  1,560
  1,768
  1,967
  2,160
  2,349
  2,535
  2,719
  2,903
  3,087
  1,208
  1,397
  1,589
  1,786
  1,987
  2,194
  2,407
  2,628
  2,855
  3,091
  3,336
  3,591
  3,856
  4,132
  4,419
  4,719
  5,032
  5,360
  5,701
  6,059
Cash from financing (excl. dividends), $m  
  -5,680
  2,777
  3,303
  3,761
  4,204
  4,639
  5,069
  5,497
  5,925
  6,357
  6,793
  5,173
  5,628
  6,094
  6,574
  7,067
  7,578
  8,106
  8,655
  9,223
  9,815
  10,431
  11,073
  11,742
  12,441
  13,170
  13,933
  14,731
  15,566
  16,438
  17,352
Total cash flow (excl. dividends), $m
  111
  5,361
  5,852
  6,284
  6,708
  7,127
  7,545
  7,964
  8,388
  8,818
  9,256
  6,875
  7,336
  7,811
  8,302
  8,809
  9,335
  9,882
  10,450
  11,042
  11,658
  12,301
  12,973
  13,674
  14,408
  15,174
  15,977
  16,817
  17,696
  18,617
  19,582
Retained Cash Flow (-), $m
  11,742
  -1,448
  -1,715
  -1,961
  -2,201
  -2,439
  -2,676
  -2,914
  -3,155
  -3,399
  -3,648
  -3,902
  -4,164
  -4,433
  -4,712
  -5,000
  -5,298
  -5,609
  -5,931
  -6,267
  -6,617
  -6,982
  -7,363
  -7,761
  -8,177
  -8,613
  -9,068
  -9,545
  -10,044
  -10,566
  -11,114
Prev. year cash balance distribution, $m
 
  3,065
  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
 
  6,978
  4,136
  4,323
  4,507
  4,688
  4,869
  5,050
  5,233
  5,419
  5,608
  2,973
  3,172
  3,378
  3,590
  3,809
  4,037
  4,273
  4,519
  4,775
  5,041
  5,319
  5,610
  5,913
  6,230
  6,562
  6,909
  7,272
  7,652
  8,050
  8,468
Discount rate, %
 
  7.70
  8.09
  8.49
  8.91
  9.36
  9.83
  10.32
  10.83
  11.38
  11.95
  12.54
  13.17
  13.83
  14.52
  15.25
  16.01
  16.81
  17.65
  18.53
  19.46
  20.43
  21.45
  22.52
  23.65
  24.83
  26.07
  27.38
  28.75
  30.18
  31.69
PV of cash for distribution, $m
 
  6,479
  3,541
  3,386
  3,203
  2,997
  2,774
  2,539
  2,298
  2,055
  1,815
  810
  719
  627
  538
  453
  375
  305
  242
  189
  144
  107
  78
  55
  38
  26
  17
  11
  6
  4
  2
Current shareholders' claim on cash, %
  100
  98.2
  96.2
  93.9
  91.6
  89.2
  86.7
  84.2
  81.6
  79.1
  76.6
  75.6
  74.6
  73.5
  72.3
  71.1
  69.8
  68.5
  67.1
  65.7
  64.3
  62.9
  61.5
  60.1
  58.6
  57.2
  55.8
  54.4
  53.0
  51.7
  50.3

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 -114.4
Price to Sales 15.1
Price to Book 10
Price to Tangible Book
Price to Cash Flow 50.7
Price to Free Cash Flow 134.4
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 $50271 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 7.7%, 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 97.3%.

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 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 52.2%.

Life of production assets of 10 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 -10%. 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 - $76201 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 $75.2 billion.

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COMPANY NEWS

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▶ [$$] Vodafone revamp shifts focus away from Newbury HQ   [Jul-30-17 12:28PM  Financial Times]
▶ [$$] PwC publicly rebuked over alleged Vodafone conflict   [Jul-28-17 11:33AM  Financial Times]
▶ [$$] Ofcom UK broadband plans battered by tribunal and telcos   [Jul-26-17 01:05PM  Financial Times]
▶ Morning News Call - India, July 25   [Jul-24-17 11:30PM  Reuters]
▶ A Look at Realignments at Vodafone   [07:36AM  Market Realist]
▶ FTSE 100 ends lower, but retains grip on weekly gain   [Jul-21-17 01:10PM  MarketWatch]
▶ Telco groups at war over 5G spectrum   [Jul-12-17 08:35PM  ZDNet]
▶ Top Ranked Income Stocks to Buy for July 5th   [Jul-05-17 11:02AM  Zacks]
▶ Optus confirms 4G and fixed-line outage   [Jul-04-17 07:44PM  ZDNet]
▶ ETFs with exposure to Vodafone Group Plc : June 30, 2017   [Jun-30-17 03:33PM  Capital Cube]
▶ [$$] HGGC Backs Provider of Data-Visualization Software   [Jun-28-17 12:33PM  The Wall Street Journal]
▶ Top Ranked Income Stocks to Buy for June 27th   [Jun-27-17 10:19AM  Zacks]
▶ 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]
Stock chart of VOD Financial statements 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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