Intrinsic value of Yahoo! - YHOO

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$48.21

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$48.21

 
Intrinsic value

$8.04

 
Up/down potential

-83%

 
Rating

str. sell

 
Value-price divergence* premium content

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

We calculate the intrinsic value of YHOO 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 45.9

 

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, %
  4.05
  15.40
  14.36
  13.42
  12.58
  11.82
  11.14
  10.53
  9.97
  9.48
  9.03
  8.63
  8.26
  7.94
  7.64
  7.38
  7.14
  6.93
  6.73
  6.56
  6.40
  6.26
  6.14
  6.02
  5.92
  5.83
  5.75
  5.67
  5.60
  5.54
  5.49
Revenue, $m
  5,169
  5,965
  6,822
  7,737
  8,711
  9,741
  10,826
  11,966
  13,159
  14,406
  15,707
  17,062
  18,472
  19,938
  21,462
  23,046
  24,691
  26,402
  28,180
  30,029
  31,952
  33,954
  36,038
  38,209
  40,471
  42,830
  45,292
  47,861
  50,543
  53,345
  56,274
Variable operating expenses, $m
 
  11,661
  13,330
  15,114
  17,010
  19,016
  21,130
  23,350
  25,675
  28,104
  30,638
  33,236
  35,982
  38,838
  41,807
  44,892
  48,098
  51,429
  54,893
  58,494
  62,241
  66,140
  70,199
  74,428
  78,836
  83,432
  88,226
  93,230
  98,456
  103,914
  109,619
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
  5,814
  11,661
  13,330
  15,114
  17,010
  19,016
  21,130
  23,350
  25,675
  28,104
  30,638
  33,236
  35,982
  38,838
  41,807
  44,892
  48,098
  51,429
  54,893
  58,494
  62,241
  66,140
  70,199
  74,428
  78,836
  83,432
  88,226
  93,230
  98,456
  103,914
  109,619
Operating income, $m
  -645
  -5,696
  -6,508
  -7,376
  -8,299
  -9,275
  -10,304
  -11,384
  -12,516
  -13,698
  -14,931
  -16,174
  -17,510
  -18,900
  -20,345
  -21,846
  -23,406
  -25,028
  -26,713
  -28,466
  -30,289
  -32,186
  -34,162
  -36,220
  -38,365
  -40,601
  -42,934
  -45,370
  -47,912
  -50,569
  -53,345
EBITDA, $m
  -138
  -5,278
  -6,035
  -6,846
  -7,707
  -8,618
  -9,578
  -10,587
  -11,643
  -12,746
  -13,897
  -15,095
  -16,343
  -17,640
  -18,988
  -20,390
  -21,846
  -23,359
  -24,932
  -26,568
  -28,270
  -30,040
  -31,884
  -33,805
  -35,807
  -37,894
  -40,072
  -42,345
  -44,718
  -47,197
  -49,788
Interest expense (income), $m
  0
  46
  139
  238
  344
  457
  576
  701
  833
  971
  1,115
  1,266
  1,422
  1,585
  1,755
  1,931
  2,114
  2,305
  2,502
  2,708
  2,922
  3,144
  3,376
  3,617
  3,868
  4,129
  4,402
  4,687
  4,984
  5,294
  5,618
Earnings before tax, $m
  -699
  -5,742
  -6,647
  -7,614
  -8,643
  -9,732
  -10,880
  -12,086
  -13,349
  -14,669
  -16,046
  -17,439
  -18,933
  -20,486
  -22,100
  -23,777
  -25,521
  -27,332
  -29,215
  -31,174
  -33,211
  -35,331
  -37,538
  -39,837
  -42,232
  -44,731
  -47,337
  -50,056
  -52,896
  -55,863
  -58,963
Tax expense, $m
  -126
  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
Net income, $m
  -214
  -5,742
  -6,647
  -7,614
  -8,643
  -9,732
  -10,880
  -12,086
  -13,349
  -14,669
  -16,046
  -17,439
  -18,933
  -20,486
  -22,100
  -23,777
  -25,521
  -27,332
  -29,215
  -31,174
  -33,211
  -35,331
  -37,538
  -39,837
  -42,232
  -44,731
  -47,337
  -50,056
  -52,896
  -55,863
  -58,963

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,820
  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
  48,083
  47,720
  54,573
  61,899
  69,687
  77,926
  86,608
  95,725
  105,273
  115,249
  125,655
  136,495
  147,774
  159,503
  171,695
  184,365
  197,531
  211,214
  225,438
  240,229
  255,615
  271,628
  288,300
  305,668
  323,769
  342,643
  362,334
  382,885
  404,345
  426,763
  450,192
Adjusted assets (=assets-cash), $m
  41,263
  47,720
  54,573
  61,899
  69,687
  77,926
  86,608
  95,725
  105,273
  115,249
  125,655
  136,495
  147,774
  159,503
  171,695
  184,365
  197,531
  211,214
  225,438
  240,229
  255,615
  271,628
  288,300
  305,668
  323,769
  342,643
  362,334
  382,885
  404,345
  426,763
  450,192
Revenue / Adjusted assets
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
  0.125
Average production assets, $m
  1,634
  1,885
  2,156
  2,445
  2,753
  3,078
  3,421
  3,781
  4,158
  4,552
  4,963
  5,392
  5,837
  6,300
  6,782
  7,282
  7,802
  8,343
  8,905
  9,489
  10,097
  10,729
  11,388
  12,074
  12,789
  13,534
  14,312
  15,124
  15,972
  16,857
  17,783
Working capital, $m
  6,839
  24
  27
  31
  35
  39
  43
  48
  53
  58
  63
  68
  74
  80
  86
  92
  99
  106
  113
  120
  128
  136
  144
  153
  162
  171
  181
  191
  202
  213
  225
Total debt, $m
  1,300
  3,974
  6,805
  9,830
  13,047
  16,449
  20,035
  23,800
  27,744
  31,864
  36,162
  40,638
  45,297
  50,141
  55,176
  60,409
  65,846
  71,497
  77,372
  83,481
  89,835
  96,448
  103,334
  110,507
  117,983
  125,778
  133,910
  142,398
  151,260
  160,519
  170,195
Total liabilities, $m
  17,034
  19,708
  22,539
  25,564
  28,781
  32,183
  35,769
  39,534
  43,478
  47,598
  51,896
  56,372
  61,031
  65,875
  70,910
  76,143
  81,580
  87,231
  93,106
  99,215
  105,569
  112,182
  119,068
  126,241
  133,717
  141,512
  149,644
  158,132
  166,994
  176,253
  185,929
Total equity, $m
  31,049
  28,012
  32,034
  36,335
  40,906
  45,742
  50,839
  56,190
  61,795
  67,651
  73,760
  80,122
  86,743
  93,628
  100,785
  108,222
  115,951
  123,983
  132,332
  141,014
  150,046
  159,446
  169,232
  179,427
  190,052
  201,132
  212,690
  224,754
  237,351
  250,510
  264,263
Total liabilities and equity, $m
  48,083
  47,720
  54,573
  61,899
  69,687
  77,925
  86,608
  95,724
  105,273
  115,249
  125,656
  136,494
  147,774
  159,503
  171,695
  184,365
  197,531
  211,214
  225,438
  240,229
  255,615
  271,628
  288,300
  305,668
  323,769
  342,644
  362,334
  382,886
  404,345
  426,763
  450,192
Debt-to-equity ratio
  0.042
  0.140
  0.210
  0.270
  0.320
  0.360
  0.390
  0.420
  0.450
  0.470
  0.490
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.580
  0.590
  0.600
  0.600
  0.610
  0.620
  0.620
  0.630
  0.630
  0.630
  0.640
  0.640
  0.640
Adjusted equity ratio
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587
  0.587

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -214
  -5,742
  -6,647
  -7,614
  -8,643
  -9,732
  -10,880
  -12,086
  -13,349
  -14,669
  -16,046
  -17,439
  -18,933
  -20,486
  -22,100
  -23,777
  -25,521
  -27,332
  -29,215
  -31,174
  -33,211
  -35,331
  -37,538
  -39,837
  -42,232
  -44,731
  -47,337
  -50,056
  -52,896
  -55,863
  -58,963
Depreciation, amort., depletion, $m
  507
  419
  473
  531
  592
  657
  726
  798
  873
  952
  1,034
  1,078
  1,167
  1,260
  1,356
  1,456
  1,560
  1,669
  1,781
  1,898
  2,019
  2,146
  2,278
  2,415
  2,558
  2,707
  2,862
  3,025
  3,194
  3,371
  3,557
Funds from operations, $m
  1,827
  -5,323
  -6,175
  -7,084
  -8,051
  -9,075
  -10,154
  -11,288
  -12,476
  -13,717
  -15,012
  -16,361
  -17,765
  -19,225
  -20,743
  -22,321
  -23,960
  -25,664
  -27,434
  -29,276
  -31,191
  -33,185
  -35,260
  -37,422
  -39,675
  -42,024
  -44,474
  -47,032
  -49,702
  -52,492
  -55,407
Change in working capital, $m
  578
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  11
  11
  12
Cash from operations, $m
  1,249
  -5,588
  -6,178
  -7,087
  -8,055
  -9,079
  -10,158
  -11,292
  -12,480
  -13,722
  -15,017
  -16,367
  -17,771
  -19,231
  -20,749
  -22,327
  -23,967
  -25,670
  -27,442
  -29,283
  -31,199
  -33,193
  -35,268
  -37,430
  -39,684
  -42,033
  -44,484
  -47,042
  -49,713
  -52,503
  -55,418
Maintenance CAPEX, $m
  0
  -327
  -377
  -431
  -489
  -551
  -616
  -684
  -756
  -832
  -910
  -993
  -1,078
  -1,167
  -1,260
  -1,356
  -1,456
  -1,560
  -1,669
  -1,781
  -1,898
  -2,019
  -2,146
  -2,278
  -2,415
  -2,558
  -2,707
  -2,862
  -3,025
  -3,194
  -3,371
New CAPEX, $m
  -241
  -251
  -271
  -289
  -308
  -325
  -343
  -360
  -377
  -394
  -411
  -428
  -446
  -463
  -482
  -500
  -520
  -540
  -562
  -584
  -608
  -633
  -659
  -686
  -715
  -746
  -778
  -812
  -848
  -886
  -925
Cash from investing activities, $m
  -1,574
  -578
  -648
  -720
  -797
  -876
  -959
  -1,044
  -1,133
  -1,226
  -1,321
  -1,421
  -1,524
  -1,630
  -1,742
  -1,856
  -1,976
  -2,100
  -2,231
  -2,365
  -2,506
  -2,652
  -2,805
  -2,964
  -3,130
  -3,304
  -3,485
  -3,674
  -3,873
  -4,080
  -4,296
Free cash flow, $m
  -325
  -6,166
  -6,826
  -7,808
  -8,851
  -9,955
  -11,117
  -12,337
  -13,614
  -14,948
  -16,339
  -17,787
  -19,295
  -20,862
  -22,491
  -24,184
  -25,943
  -27,771
  -29,672
  -31,648
  -33,705
  -35,845
  -38,073
  -40,394
  -42,813
  -45,336
  -47,969
  -50,716
  -53,585
  -56,583
  -59,715
Issuance/(repayment) of debt, $m
  0
  2,674
  2,830
  3,026
  3,216
  3,403
  3,586
  3,765
  3,943
  4,120
  4,298
  4,477
  4,658
  4,844
  5,035
  5,233
  5,438
  5,651
  5,875
  6,109
  6,355
  6,613
  6,886
  7,173
  7,476
  7,795
  8,132
  8,488
  8,863
  9,259
  9,676
Issuance/(repurchase) of shares, $m
  18
  454
  8,018
  9,083
  10,207
  11,389
  12,628
  13,923
  15,275
  16,684
  18,149
  19,673
  21,257
  22,903
  24,612
  26,388
  28,234
  30,152
  32,147
  34,222
  36,382
  38,631
  40,974
  43,416
  45,963
  48,621
  51,395
  54,292
  57,319
  60,483
  63,792
Cash from financing (excl. dividends), $m  
  -194
  3,128
  10,848
  12,109
  13,423
  14,792
  16,214
  17,688
  19,218
  20,804
  22,447
  24,150
  25,915
  27,747
  29,647
  31,621
  33,672
  35,803
  38,022
  40,331
  42,737
  45,244
  47,860
  50,589
  53,439
  56,416
  59,527
  62,780
  66,182
  69,742
  73,468
Total cash flow (excl. dividends), $m
  -512
  -3,491
  -3,995
  -4,782
  -5,635
  -6,552
  -7,531
  -8,571
  -9,670
  -10,827
  -12,041
  -13,311
  -14,636
  -16,018
  -17,456
  -18,951
  -20,506
  -22,120
  -23,798
  -25,540
  -27,350
  -29,231
  -31,187
  -33,221
  -35,338
  -37,541
  -39,837
  -42,228
  -44,722
  -47,324
  -50,039
Retained Cash Flow (-), $m
  -2,005
  -3,783
  -4,022
  -4,300
  -4,571
  -4,836
  -5,096
  -5,352
  -5,605
  -5,856
  -6,108
  -6,363
  -6,621
  -6,885
  -7,157
  -7,437
  -7,728
  -8,032
  -8,350
  -8,682
  -9,032
  -9,399
  -9,787
  -10,195
  -10,625
  -11,079
  -11,558
  -12,064
  -12,597
  -13,159
  -13,753
Prev. year cash balance distribution, $m
 
  6,820
  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
  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
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
 
  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
Current shareholders' claim on cash, %
  100
  98.7
  82.7
  69.4
  58.3
  49.1
  41.4
  34.9
  29.5
  24.9
  21.1
  17.9
  15.2
  12.9
  10.9
  9.3
  7.9
  6.7
  5.7
  4.9
  4.1
  3.5
  3.0
  2.6
  2.2
  1.9
  1.6
  1.4
  1.2
  1.0
  0.8

Yahoo! Inc., together with its subsidiaries, provides search and display advertising services on Yahoo properties and affiliate sites worldwide. The company offers Yahoo Search that serves as a guide for users to discover information on the Internet; Yahoo Mail, which connects users to the people and content; and Yahoo Messenger, an instant messaging service, which enables users to connect, communicate, and share experiences in real-time. It also provides digital content products, including Yahoo News, which gives users to discover, consume, and engage around the news, content, and video; Yahoo Sports, which serves audiences of sports enthusiasts; Yahoo Finance that offers a range of financial data, information, and tools; Yahoo Lifestyle to engage users passionate about style and fashion; and Tumblr, which provides a Web platform and mobile applications on iOS and android to create, share, and curate content, as well as Tumblr messaging that enables users to engage with other users that share their same interests and passions. In addition, the company provides advertiser products, such as Yahoo Gemini, a marketplace for search and native advertising; and BrightRoll, which offers a suite of media-agnostic tools to enable advertisers, publishers, and partners connect with users across ad formats and devices. Further, it offers advertising formats; and digital advertising products, such as Yahoo native, Yahoo video, Yahoo premium, and Yahoo audience ads. Additionally, the company offers Yahoo Mobile Developer suite consisting of Flurry Analytics, Yahoo App Publishing, Yahoo App Marketing, and Tumblr In-App Sharing tools to measure, monetize, advertise, and improve their apps. Yahoo! Inc. was founded in 1994 and is headquartered in Sunnyvale, California.

FINANCIAL RATIOS  of  Yahoo! (YHOO)

Valuation Ratios
P/E Ratio -215.2
Price to Sales 8.9
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 36.9
Price to Free Cash Flow 45.7
Growth Rates
Sales Growth Rate 4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -56.9%
Cap. Spend. - 3 Yr. Gr. Rate -6.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 4.2%
Total Debt to Equity 4.2%
Interest Coverage 0
Management Effectiveness
Return On Assets -0.5%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital -0.7%
Ret/ On T. Cap. - 3 Yr. Avg. 4.9%
Return On Equity -0.7%
Return On Equity - 3 Yr. Avg. 5.2%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 47.4%
Gross Margin - 3 Yr. Avg. 59.2%
EBITDA Margin -3.7%
EBITDA Margin - 3 Yr. Avg. 50.7%
Operating Margin -12.5%
Oper. Margin - 3 Yr. Avg. 39.5%
Pre-Tax Margin -13.5%
Pre-Tax Margin - 3 Yr. Avg. 39%
Net Profit Margin -4.1%
Net Profit Margin - 3 Yr. Avg. 23.7%
Effective Tax Rate 18%
Eff/ Tax Rate - 3 Yr. Avg. 19.4%
Payout Ratio 0%

YHOO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the YHOO stock intrinsic value calculation we used $5169 million for the last fiscal year's total revenue generated by Yahoo!. The default revenue input number comes from 2016 income statement of Yahoo!. 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 YHOO stock valuation model: a) initial revenue growth rate of 15.4% 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 YHOO is calculated based on our internal credit rating of Yahoo!, 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 Yahoo!.
    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 YHOO stock the variable cost ratio is equal to 195.6%.

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 YHOO 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 Yahoo!.

Corporate tax rate of 27% is the nominal tax rate for Yahoo!. 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 YHOO 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 YHOO are equal to 31.6%.

Life of production assets of 4.4 years is the average useful life of capital assets used in Yahoo! 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 YHOO is equal to 0.4%. 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 - $31049 million for Yahoo! - 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 952.177 million for Yahoo! 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 Yahoo! at the current share price and the inputted number of shares is $45.9 billion.


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COMPANY NEWS

▶ [$$] Yahoo CEO Marissa Mayer Earned $27.4 Million Last Year   [Apr-30-17 08:48PM  The Wall Street Journal]
▶ [$$] Yahoo CEO Marissa Mayer Earned $27.4 Million Last Year   [Apr-28-17 05:40PM  The Wall Street Journal]
▶ Is the NFL Draft Must-See?   [12:05PM  The Wall Street Journal]
▶ Is the NFL Draft Must-See?   [12:05AM  The Wall Street Journal]
▶ [$$] Yahoo's Marissa Mayer to Make $187 Million After Verizon Deal   [Apr-25-17 07:57PM  The Wall Street Journal]
▶ Marissa Mayer to get at least $186M should Yahoo approve Verizon deal   [03:15PM  American City Business Journals]
▶ Marissa Mayer will get $186M in Yahoos sale to Verizon   [11:02AM  American City Business Journals]
▶ Mayer and other Yahoo execs missing from Oath leadership list, report says   [Apr-24-17 06:15PM  American City Business Journals]
▶ Could Verizon Be a Time Inc. Bidder?   [Apr-22-17 09:15AM  24/7 Wall St.]
▶ Bye-bye, and here's your check: Golden exit for the departed   [Apr-21-17 06:05PM  Associated Press]
▶ Wrong Number: Verizon Earnings Miss Amid Big Subscriber Loss   [04:40PM  Investor's Business Daily]
▶ Yahoo Finance Live: Midday Movers - Apr 19th, 2017   [01:54PM  Yahoo Finance Video]
▶ Yahoo Beats Expectations for 1st Quarter   [12:02PM  GuruFocus.com]
▶ Yahoo Finance Live: Market Movers - Apr 19th, 2017   [07:20AM  Yahoo Finance Video]
▶ [$$] Business Watch   [Apr-18-17 11:00PM  The Wall Street Journal]
▶ [$$] Yahoo's Revenue, EPS Beat Expectations   [06:09PM  The Wall Street Journal]
▶ Yahoo Reports Earnings for the Last Time   [04:39PM  24/7 Wall St.]
▶ Yahoo Rides Into Sunset With Earnings, Revenue Beat   [04:25PM  Investor's Business Daily]
▶ Yahoo beats on top & bottom lines   [04:13PM  CNBC Videos]
▶ Yahoo Reports First Quarter 2017 Results   [04:05PM  Business Wire]
▶ [$$] Yahoo Earnings: What to Watch   [08:00AM  The Wall Street Journal]
▶ What to Expect From Yahoo Earnings   [Apr-17-17 05:52PM  Bloomberg Video]
▶ [$$] Uber registers $2.8bn loss in 2016 expansion drive   [Apr-14-17 05:44PM  Financial Times]
▶ Yahoo Announces First Quarter 2017 Earnings Release Date   [Apr-13-17 08:00AM  Business Wire]
▶ Yahoo accused of mismanaging fund for dissidents in China   [Apr-12-17 12:18AM  Associated Press]
▶ 10 Things to Know for Wednesday   [Apr-11-17 10:10PM  Associated Press]
▶ Verizon's Oath for Data Privacy, Data Piracy   [Apr-08-17 03:40PM  TheStreet.com]
▶ 11 Worst Tech Mergers and Acquisitions Ever   [Apr-07-17 01:52PM  Insider Monkey]
▶ Tech's trouble in digital advertising   [Apr-06-17 03:17PM  CNBC Videos]
▶ Canadian accused in Yahoo hack has bail hearing   [Apr-05-17 05:19PM  Associated Press]
▶ 5 Winners and 5 Losers: Tech Industry   [12:53PM  Investopedia]
▶ [$$] Verizon Takes an Oath, and Heat   [05:30AM  The Wall Street Journal]
Stock chart of YHOO Financial statements of YHOO
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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