Intrinsic value of Verizon Communications - VZ

Previous Close

$51.09

  Intrinsic Value

$42.87

stock screener

  Rating & Target

hold

-16%

Previous close

$51.09

 
Intrinsic value

$42.87

 
Up/down potential

-16%

 
Rating

hold

We calculate the intrinsic value of VZ 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 208.4

 

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, %
  -4.29
  2.50
  2.75
  2.97
  3.18
  3.36
  3.52
  3.67
  3.80
  3.92
  4.03
  4.13
  4.22
  4.29
  4.36
  4.43
  4.49
  4.54
  4.58
  4.62
  4.66
  4.70
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
Revenue, $m
  125,980
  129,130
  132,681
  136,628
  140,969
  145,705
  150,840
  156,378
  162,327
  168,696
  175,497
  182,742
  190,445
  198,623
  207,292
  216,471
  226,180
  236,442
  247,278
  258,714
  270,776
  283,492
  296,891
  311,004
  325,865
  341,509
  357,971
  375,292
  393,511
  412,672
  432,819
Variable operating expenses, $m
 
  96,650
  99,233
  102,104
  105,262
  108,707
  112,442
  116,470
  120,798
  125,431
  130,378
  132,927
  138,531
  144,479
  150,785
  157,462
  164,525
  171,989
  179,871
  188,190
  196,964
  206,213
  215,960
  226,226
  237,036
  248,415
  260,390
  272,989
  286,242
  300,179
  314,835
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
  98,921
  96,650
  99,233
  102,104
  105,262
  108,707
  112,442
  116,470
  120,798
  125,431
  130,378
  132,927
  138,531
  144,479
  150,785
  157,462
  164,525
  171,989
  179,871
  188,190
  196,964
  206,213
  215,960
  226,226
  237,036
  248,415
  260,390
  272,989
  286,242
  300,179
  314,835
Operating income, $m
  27,059
  32,480
  33,448
  34,524
  35,707
  36,998
  38,398
  39,907
  41,529
  43,265
  45,119
  49,814
  51,914
  54,144
  56,507
  59,009
  61,656
  64,453
  67,407
  70,524
  73,812
  77,278
  80,931
  84,778
  88,829
  93,094
  97,581
  102,303
  107,269
  112,492
  117,984
EBITDA, $m
  42,987
  49,454
  50,814
  52,326
  53,989
  55,803
  57,769
  59,890
  62,168
  64,608
  67,212
  69,987
  72,937
  76,069
  79,389
  82,905
  86,623
  90,553
  94,703
  99,083
  103,702
  108,572
  113,704
  119,109
  124,801
  130,792
  137,097
  143,730
  150,708
  158,046
  165,762
Interest expense (income), $m
  4,085
  4,006
  4,144
  4,377
  4,636
  4,920
  5,230
  5,567
  5,929
  6,319
  6,737
  7,182
  7,657
  8,161
  8,697
  9,265
  9,867
  10,503
  11,175
  11,885
  12,634
  13,425
  14,258
  15,136
  16,060
  17,034
  18,059
  19,137
  20,272
  21,466
  22,721
Earnings before tax, $m
  20,986
  28,473
  29,303
  30,147
  31,071
  32,078
  33,167
  34,341
  35,599
  36,946
  38,383
  42,632
  44,258
  45,982
  47,809
  49,744
  51,789
  53,950
  56,232
  58,639
  61,178
  63,854
  66,673
  69,643
  72,769
  76,060
  79,522
  83,165
  86,997
  91,026
  95,263
Tax expense, $m
  7,378
  7,688
  7,912
  8,140
  8,389
  8,661
  8,955
  9,272
  9,612
  9,975
  10,363
  11,511
  11,950
  12,415
  12,909
  13,431
  13,983
  14,566
  15,183
  15,833
  16,518
  17,241
  18,002
  18,804
  19,648
  20,536
  21,471
  22,455
  23,489
  24,577
  25,721
Net income, $m
  13,127
  20,785
  21,391
  22,007
  22,682
  23,417
  24,212
  25,069
  25,988
  26,971
  28,019
  31,122
  32,308
  33,567
  34,901
  36,313
  37,806
  39,383
  41,049
  42,806
  44,660
  46,613
  48,671
  50,839
  53,121
  55,524
  58,051
  60,711
  63,508
  66,449
  69,542

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,880
  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
  244,180
  247,375
  254,177
  261,739
  270,056
  279,129
  288,965
  299,574
  310,971
  323,173
  336,201
  350,080
  364,838
  380,504
  397,111
  414,695
  433,296
  452,953
  473,712
  495,620
  518,728
  543,087
  568,756
  595,794
  624,263
  654,232
  685,769
  718,950
  753,852
  790,558
  829,155
Adjusted assets (=assets-cash), $m
  241,300
  247,375
  254,177
  261,739
  270,056
  279,129
  288,965
  299,574
  310,971
  323,173
  336,201
  350,080
  364,838
  380,504
  397,111
  414,695
  433,296
  452,953
  473,712
  495,620
  518,728
  543,087
  568,756
  595,794
  624,263
  654,232
  685,769
  718,950
  753,852
  790,558
  829,155
Revenue / Adjusted assets
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
Average production assets, $m
  179,388
  183,880
  188,937
  194,558
  200,740
  207,484
  214,796
  222,682
  231,153
  240,223
  249,908
  260,225
  271,194
  282,839
  295,184
  308,255
  322,081
  336,693
  352,124
  368,409
  385,585
  403,692
  422,772
  442,870
  464,032
  486,309
  509,751
  534,416
  560,359
  587,644
  616,334
Working capital, $m
  -3,945
  -4,261
  -4,378
  -4,509
  -4,652
  -4,808
  -4,978
  -5,160
  -5,357
  -5,567
  -5,791
  -6,030
  -6,285
  -6,555
  -6,841
  -7,144
  -7,464
  -7,803
  -8,160
  -8,538
  -8,936
  -9,355
  -9,797
  -10,263
  -10,754
  -11,270
  -11,813
  -12,385
  -12,986
  -13,618
  -14,283
Total debt, $m
  108,078
  109,059
  115,182
  121,987
  129,472
  137,638
  146,490
  156,039
  166,295
  177,277
  189,003
  201,494
  214,776
  228,875
  243,822
  259,648
  276,388
  294,080
  312,763
  332,480
  353,277
  375,201
  398,303
  422,636
  448,259
  475,231
  503,614
  533,477
  564,889
  597,925
  632,662
Total liabilities, $m
  221,656
  222,637
  228,760
  235,565
  243,050
  251,216
  260,068
  269,617
  279,873
  290,855
  302,581
  315,072
  328,354
  342,453
  357,400
  373,226
  389,966
  407,658
  426,341
  446,058
  466,855
  488,779
  511,881
  536,214
  561,837
  588,809
  617,192
  647,055
  678,467
  711,503
  746,240
Total equity, $m
  22,524
  24,737
  25,418
  26,174
  27,006
  27,913
  28,896
  29,957
  31,097
  32,317
  33,620
  35,008
  36,484
  38,050
  39,711
  41,470
  43,330
  45,295
  47,371
  49,562
  51,873
  54,309
  56,876
  59,579
  62,426
  65,423
  68,577
  71,895
  75,385
  79,056
  82,916
Total liabilities and equity, $m
  244,180
  247,374
  254,178
  261,739
  270,056
  279,129
  288,964
  299,574
  310,970
  323,172
  336,201
  350,080
  364,838
  380,503
  397,111
  414,696
  433,296
  452,953
  473,712
  495,620
  518,728
  543,088
  568,757
  595,793
  624,263
  654,232
  685,769
  718,950
  753,852
  790,559
  829,156
Debt-to-equity ratio
  4.798
  4.410
  4.530
  4.660
  4.790
  4.930
  5.070
  5.210
  5.350
  5.490
  5.620
  5.760
  5.890
  6.020
  6.140
  6.260
  6.380
  6.490
  6.600
  6.710
  6.810
  6.910
  7.000
  7.090
  7.180
  7.260
  7.340
  7.420
  7.490
  7.560
  7.630
Adjusted equity ratio
  0.081
  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
  13,127
  20,785
  21,391
  22,007
  22,682
  23,417
  24,212
  25,069
  25,988
  26,971
  28,019
  31,122
  32,308
  33,567
  34,901
  36,313
  37,806
  39,383
  41,049
  42,806
  44,660
  46,613
  48,671
  50,839
  53,121
  55,524
  58,051
  60,711
  63,508
  66,449
  69,542
Depreciation, amort., depletion, $m
  15,928
  16,975
  17,367
  17,803
  18,282
  18,805
  19,371
  19,983
  20,639
  21,342
  22,093
  20,172
  21,023
  21,926
  22,882
  23,896
  24,968
  26,100
  27,296
  28,559
  29,890
  31,294
  32,773
  34,331
  35,972
  37,698
  39,516
  41,428
  43,439
  45,554
  47,778
Funds from operations, $m
  12,694
  37,760
  38,758
  39,810
  40,964
  42,222
  43,583
  45,051
  46,627
  48,313
  50,112
  51,294
  53,331
  55,492
  57,783
  60,209
  62,773
  65,484
  68,345
  71,365
  74,550
  77,907
  81,445
  85,170
  89,093
  93,222
  97,567
  102,138
  106,946
  112,003
  117,320
Change in working capital, $m
  -10,021
  -104
  -117
  -130
  -143
  -156
  -169
  -183
  -196
  -210
  -224
  -239
  -254
  -270
  -286
  -303
  -320
  -339
  -358
  -377
  -398
  -420
  -442
  -466
  -490
  -516
  -543
  -572
  -601
  -632
  -665
Cash from operations, $m
  22,715
  37,864
  38,875
  39,940
  41,107
  42,378
  43,753
  45,234
  46,823
  48,523
  50,337
  51,533
  53,585
  55,762
  58,069
  60,511
  63,094
  65,822
  68,703
  71,743
  74,948
  78,327
  81,887
  85,636
  89,583
  93,738
  98,110
  102,710
  107,548
  112,635
  117,985
Maintenance CAPEX, $m
  0
  -13,906
  -14,254
  -14,646
  -15,082
  -15,561
  -16,084
  -16,651
  -17,262
  -17,919
  -18,622
  -19,373
  -20,172
  -21,023
  -21,926
  -22,882
  -23,896
  -24,968
  -26,100
  -27,296
  -28,559
  -29,890
  -31,294
  -32,773
  -34,331
  -35,972
  -37,698
  -39,516
  -41,428
  -43,439
  -45,554
New CAPEX, $m
  -17,593
  -4,493
  -5,057
  -5,621
  -6,182
  -6,744
  -7,311
  -7,886
  -8,471
  -9,070
  -9,684
  -10,317
  -10,970
  -11,645
  -12,345
  -13,071
  -13,826
  -14,612
  -15,431
  -16,285
  -17,176
  -18,107
  -19,080
  -20,098
  -21,162
  -22,276
  -23,443
  -24,664
  -25,944
  -27,285
  -28,690
Cash from investing activities, $m
  -10,983
  -18,399
  -19,311
  -20,267
  -21,264
  -22,305
  -23,395
  -24,537
  -25,733
  -26,989
  -28,306
  -29,690
  -31,142
  -32,668
  -34,271
  -35,953
  -37,722
  -39,580
  -41,531
  -43,581
  -45,735
  -47,997
  -50,374
  -52,871
  -55,493
  -58,248
  -61,141
  -64,180
  -67,372
  -70,724
  -74,244
Free cash flow, $m
  11,732
  19,465
  19,564
  19,673
  19,843
  20,072
  20,358
  20,697
  21,090
  21,534
  22,030
  21,844
  22,443
  23,095
  23,799
  24,558
  25,372
  26,243
  27,172
  28,161
  29,213
  30,329
  31,512
  32,765
  34,090
  35,490
  36,969
  38,530
  40,176
  41,912
  43,741
Issuance/(repayment) of debt, $m
  -1,358
  3,626
  6,123
  6,806
  7,485
  8,166
  8,852
  9,548
  10,257
  10,982
  11,726
  12,491
  13,282
  14,099
  14,946
  15,826
  16,740
  17,692
  18,683
  19,717
  20,797
  21,924
  23,102
  24,334
  25,623
  26,971
  28,384
  29,863
  31,412
  33,036
  34,737
Issuance/(repurchase) of shares, $m
  3
  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  
  -4,060
  3,626
  6,123
  6,806
  7,485
  8,166
  8,852
  9,548
  10,257
  10,982
  11,726
  12,491
  13,282
  14,099
  14,946
  15,826
  16,740
  17,692
  18,683
  19,717
  20,797
  21,924
  23,102
  24,334
  25,623
  26,971
  28,384
  29,863
  31,412
  33,036
  34,737
Total cash flow (excl. dividends), $m
  7,672
  23,091
  25,687
  26,478
  27,328
  28,238
  29,210
  30,245
  31,347
  32,516
  33,756
  34,335
  35,725
  37,194
  38,746
  40,384
  42,112
  43,935
  45,855
  47,879
  50,010
  52,253
  54,614
  57,099
  59,713
  62,462
  65,353
  68,393
  71,588
  74,947
  78,478
Retained Cash Flow (-), $m
  -6,096
  -2,448
  -680
  -756
  -832
  -907
  -984
  -1,061
  -1,140
  -1,220
  -1,303
  -1,388
  -1,476
  -1,567
  -1,661
  -1,758
  -1,860
  -1,966
  -2,076
  -2,191
  -2,311
  -2,436
  -2,567
  -2,704
  -2,847
  -2,997
  -3,154
  -3,318
  -3,490
  -3,671
  -3,860
Prev. year cash balance distribution, $m
 
  235
  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
 
  20,878
  25,007
  25,722
  26,496
  27,331
  28,226
  29,184
  30,207
  31,296
  32,453
  32,947
  34,249
  35,627
  37,085
  38,626
  40,252
  41,969
  43,779
  45,688
  47,699
  49,817
  52,047
  54,395
  56,866
  59,465
  62,199
  65,075
  68,098
  71,277
  74,618
Discount rate, %
 
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
 
  19,014
  20,558
  18,907
  17,239
  15,569
  13,918
  12,303
  10,747
  9,267
  7,882
  6,461
  5,334
  4,330
  3,453
  2,702
  2,072
  1,555
  1,141
  817
  571
  389
  257
  165
  103
  62
  36
  20
  11
  6
  3
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

Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc.’s operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc., owns a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, Yahoo Finance and Yahoo Mail.

FINANCIAL RATIOS  of  Verizon Communications (VZ)

Valuation Ratios
P/E Ratio 15.9
Price to Sales 1.7
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow 40.7
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.5%
Cap. Spend. - 3 Yr. Gr. Rate 0.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 468.1%
Total Debt to Equity 479.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 67.4%
Return On Equity - 3 Yr. Avg. 76.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 59.2%
Gross Margin - 3 Yr. Avg. 60%
EBITDA Margin 32.5%
EBITDA Margin - 3 Yr. Avg. 32.7%
Operating Margin 21.5%
Oper. Margin - 3 Yr. Avg. 20.7%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. 16.7%
Net Profit Margin 10.4%
Net Profit Margin - 3 Yr. Avg. 10.5%
Effective Tax Rate 35.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.6%
Payout Ratio 70.6%

VZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VZ stock intrinsic value calculation we used $125980 million for the last fiscal year's total revenue generated by Verizon Communications. The default revenue input number comes from 2016 income statement of Verizon Communications. 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 VZ stock valuation model: a) initial revenue growth rate of 2.5% 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 9.8%, whose default value for VZ is calculated based on our internal credit rating of Verizon Communications, 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 Verizon Communications.
    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 VZ stock the variable cost ratio is equal to 74.9%.

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 VZ 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 3.8% for Verizon Communications.

Corporate tax rate of 27% is the nominal tax rate for Verizon Communications. 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 VZ 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 VZ are equal to 142.4%.

Life of production assets of 12.9 years is the average useful life of capital assets used in Verizon Communications 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 VZ is equal to -3.3%. 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 - $22524 million for Verizon Communications - 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 4079.35 million for Verizon Communications 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 Verizon Communications at the current share price and the inputted number of shares is $208.4 billion.

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COMPANY NEWS

▶ What the Verizon-NFL Deal Means for Subscribers   [Dec-11-17 02:02PM  InvestorPlace]
▶ NFL, Verizon extend media rights deal for 5 years   [01:15PM  American City Business Journals]
▶ Verizon inks deal to stream NFL games   [11:21AM  Reuters Videos]
▶ Verizon Gets Expanded Rights To NFL Games Under New Deal   [09:55AM  Investor's Business Daily]
▶ Don't Give Up On These Five Top Stocks Just Below Buy Points   [09:42AM  Investor's Business Daily]
▶ Sprint and T-Mobile after the Merger Collapse   [07:33AM  Market Realist]
▶ Net neutrality fans speak up as FCC set to strike down rules   [Dec-08-17 03:39PM  Associated Press]
▶ Verizon's NYC truck fleet is now powered by Boston startup's tech   [03:10PM  American City Business Journals]
▶ Telecom stocks to buy now   [03:10PM  CNBC Videos]
▶ What to Expect From AT&T, Inc. in 2018   [12:00PM  Motley Fool]
▶ 3 Growth Stocks at Deep-Value Prices   [06:05AM  Motley Fool]
▶ CNBC Tech Check Evening Edition: December 06, 2017   [Dec-06-17 05:42PM  CNBC Videos]
▶ The risk is not priced in to Apple: Portfolio manager   [Dec-05-17 04:06PM  CNBC Videos]
▶ How Apple's iPhone X Could Make Big Telecom Companies Squirm   [04:02PM  Investor's Business Daily]
▶ NFL wraps up Verizon renewal, but details still to come   [02:40PM  American City Business Journals]
▶ 2 Factors That Might Make Verizon a Buy   [01:04PM  Barrons.com]
▶ Behind Charters Valuation after 3Q17 Results   [09:02AM  Market Realist]
▶ How Charter Views Its Wireless Strategy   [07:32AM  Market Realist]
▶ These 3 Dow Stocks Have Entered Buy Zones   [12:45PM  Investor's Business Daily]
▶ Fox, Disney Restart Asset Sale Talks   [05:28AM  Investopedia]
▶ [$$] Disney Re-Engages in Talks to Buy 21st Century Fox Assets   [Dec-02-17 01:54PM  The Wall Street Journal]
▶ Is This a Setback for the Internet of Things?   [Dec-01-17 05:17PM  Motley Fool]
▶ Amazon May Balk, But Could AT&T, Verizon Get Sports Rights?   [01:18PM  Investor's Business Daily]
▶ [$$] Verizon to Sell Wireless Home Broadband, Challenging Cable   [Nov-30-17 11:28PM  The Wall Street Journal]
▶ Still Too Early For Verizon's 5G To Worry Comcast: Analysts   [04:34PM  Investor's Business Daily]
Financial statements of VZ
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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