Intrinsic value of Alibaba Group Holding ADR - BABA

Previous Close

$184.40

  Intrinsic Value

$1,146

stock screener

  Rating & Target

str. buy

+521%

Previous close

$184.40

 
Intrinsic value

$1,146

 
Up/down potential

+521%

 
Rating

str. buy

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

We calculate the intrinsic value of BABA 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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  56.48
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  22,898
  36,637
  56,604
  84,651
  122,824
  173,288
  238,230
  319,775
  419,885
  540,289
  682,430
  847,423
  1,036,055
  1,248,795
  1,485,820
  1,747,060
  2,032,250
  2,340,982
  2,672,756
  3,027,036
  3,403,287
  3,801,019
  4,219,817
  4,659,364
  5,119,458
  5,600,029
  6,101,144
  6,623,012
  7,165,982
  7,730,547
  8,317,340
Variable operating expenses, $m
 
  24,191
  36,386
  53,516
  76,830
  107,651
  147,315
  197,119
  258,262
  331,800
  418,613
  517,570
  632,778
  762,711
  907,475
  1,067,030
  1,241,212
  1,429,772
  1,632,405
  1,848,784
  2,078,582
  2,321,500
  2,577,284
  2,845,740
  3,126,746
  3,420,259
  3,726,318
  4,045,052
  4,376,675
  4,721,488
  5,079,876
Fixed operating expenses, $m
 
  485
  497
  509
  522
  535
  549
  562
  576
  591
  605
  621
  636
  652
  668
  685
  702
  720
  738
  756
  775
  794
  814
  835
  856
  877
  899
  921
  944
  968
  992
Total operating expenses, $m
  16,253
  24,676
  36,883
  54,025
  77,352
  108,186
  147,864
  197,681
  258,838
  332,391
  419,218
  518,191
  633,414
  763,363
  908,143
  1,067,715
  1,241,914
  1,430,492
  1,633,143
  1,849,540
  2,079,357
  2,322,294
  2,578,098
  2,846,575
  3,127,602
  3,421,136
  3,727,217
  4,045,973
  4,377,619
  4,722,456
  5,080,868
Operating income, $m
  6,645
  11,961
  19,721
  30,626
  45,472
  65,101
  90,366
  122,093
  161,046
  207,899
  263,211
  329,232
  402,641
  485,432
  577,676
  679,345
  790,337
  910,490
  1,039,613
  1,177,496
  1,323,930
  1,478,725
  1,641,719
  1,812,789
  1,991,856
  2,178,894
  2,373,927
  2,577,038
  2,788,362
  3,008,091
  3,236,472
EBITDA, $m
  8,712
  14,234
  22,243
  33,499
  48,822
  69,082
  95,159
  127,905
  168,109
  216,467
  273,556
  339,825
  415,592
  501,042
  596,249
  701,184
  815,740
  939,753
  1,073,023
  1,215,333
  1,366,471
  1,526,237
  1,694,467
  1,871,031
  2,055,849
  2,248,894
  2,450,192
  2,659,825
  2,877,937
  3,104,723
  3,340,439
Interest expense (income), $m
  357
  389
  1,025
  1,952
  3,253
  5,025
  7,366
  10,380
  14,164
  18,810
  24,397
  30,993
  38,649
  47,403
  57,275
  68,274
  80,396
  93,631
  107,957
  123,353
  139,793
  157,253
  175,709
  195,144
  215,540
  236,891
  259,192
  282,446
  306,663
  331,859
  358,057
Earnings before tax, $m
  8,685
  11,572
  18,696
  28,674
  42,219
  60,077
  83,000
  111,713
  146,882
  189,089
  238,814
  298,240
  363,992
  438,030
  520,401
  611,072
  709,940
  816,860
  931,656
  1,054,143
  1,184,136
  1,321,472
  1,466,009
  1,617,645
  1,776,316
  1,942,003
  2,114,736
  2,294,592
  2,481,699
  2,676,233
  2,878,415
Tax expense, $m
  1,993
  3,125
  5,048
  7,742
  11,399
  16,221
  22,410
  30,163
  39,658
  51,054
  64,480
  80,525
  98,278
  118,268
  140,508
  164,989
  191,684
  220,552
  251,547
  284,618
  319,717
  356,797
  395,823
  436,764
  479,605
  524,341
  570,979
  619,540
  670,059
  722,583
  777,172
Net income, $m
  6,319
  8,448
  13,648
  20,932
  30,820
  43,856
  60,590
  81,551
  107,224
  138,035
  174,334
  217,715
  265,714
  319,762
  379,893
  446,082
  518,256
  596,308
  680,109
  769,524
  864,420
  964,674
  1,070,187
  1,180,881
  1,296,710
  1,417,662
  1,543,757
  1,675,052
  1,811,641
  1,953,650
  2,101,243

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  21,817
  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
  73,322
  82,330
  127,200
  190,227
  276,010
  389,410
  535,349
  718,595
  943,561
  1,214,134
  1,533,550
  1,904,321
  2,328,214
  2,806,281
  3,338,921
  3,925,978
  4,566,855
  5,260,634
  6,006,194
  6,802,328
  7,647,835
  8,541,616
  9,482,735
  10,470,480
  11,504,399
  12,584,335
  13,710,437
  14,883,172
  16,103,330
  17,372,016
  18,690,651
Adjusted assets (=assets-cash), $m
  51,505
  82,330
  127,200
  190,227
  276,010
  389,410
  535,349
  718,595
  943,561
  1,214,134
  1,533,550
  1,904,321
  2,328,214
  2,806,281
  3,338,921
  3,925,978
  4,566,855
  5,260,634
  6,006,194
  6,802,328
  7,647,835
  8,541,616
  9,482,735
  10,470,480
  11,504,399
  12,584,335
  13,710,437
  14,883,172
  16,103,330
  17,372,016
  18,690,651
Revenue / Adjusted assets
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
  0.445
Average production assets, $m
  2,395
  3,847
  5,943
  8,888
  12,897
  18,195
  25,014
  33,576
  44,088
  56,730
  71,655
  88,979
  108,786
  131,123
  156,011
  183,441
  213,386
  245,803
  280,639
  317,839
  357,345
  399,107
  443,081
  489,233
  537,543
  588,003
  640,620
  695,416
  752,428
  811,707
  873,321
Working capital, $m
  12,775
  -11,028
  -17,038
  -25,480
  -36,970
  -52,160
  -71,707
  -96,252
  -126,385
  -162,627
  -205,411
  -255,074
  -311,853
  -375,887
  -447,232
  -525,865
  -611,707
  -704,636
  -804,500
  -911,138
  -1,024,389
  -1,144,107
  -1,270,165
  -1,402,468
  -1,540,957
  -1,685,609
  -1,836,444
  -1,993,526
  -2,156,960
  -2,326,895
  -2,503,519
Total debt, $m
  13,271
  29,291
  55,764
  92,950
  143,562
  210,468
  296,572
  404,687
  537,417
  697,055
  885,510
  1,104,265
  1,354,363
  1,636,422
  1,950,679
  2,297,043
  2,675,160
  3,084,490
  3,524,371
  3,994,089
  4,492,939
  5,020,270
  5,575,530
  6,158,299
  6,768,312
  7,405,474
  8,069,874
  8,761,787
  9,481,680
  10,230,206
  11,008,200
Total liabilities, $m
  32,554
  48,575
  75,048
  112,234
  162,846
  229,752
  315,856
  423,971
  556,701
  716,339
  904,794
  1,123,549
  1,373,647
  1,655,706
  1,969,963
  2,316,327
  2,694,444
  3,103,774
  3,543,655
  4,013,373
  4,512,223
  5,039,554
  5,594,814
  6,177,583
  6,787,596
  7,424,758
  8,089,158
  8,781,071
  9,500,964
  10,249,490
  11,027,484
Total equity, $m
  40,767
  33,755
  52,152
  77,993
  113,164
  159,658
  219,493
  294,624
  386,860
  497,795
  628,755
  780,771
  954,568
  1,150,575
  1,368,958
  1,609,651
  1,872,410
  2,156,860
  2,462,540
  2,788,954
  3,135,613
  3,502,063
  3,887,921
  4,292,897
  4,716,804
  5,159,577
  5,621,279
  6,102,101
  6,602,365
  7,122,527
  7,663,167
Total liabilities and equity, $m
  73,321
  82,330
  127,200
  190,227
  276,010
  389,410
  535,349
  718,595
  943,561
  1,214,134
  1,533,549
  1,904,320
  2,328,215
  2,806,281
  3,338,921
  3,925,978
  4,566,854
  5,260,634
  6,006,195
  6,802,327
  7,647,836
  8,541,617
  9,482,735
  10,470,480
  11,504,400
  12,584,335
  13,710,437
  14,883,172
  16,103,329
  17,372,017
  18,690,651
Debt-to-equity ratio
  0.326
  0.870
  1.070
  1.190
  1.270
  1.320
  1.350
  1.370
  1.390
  1.400
  1.410
  1.410
  1.420
  1.420
  1.420
  1.430
  1.430
  1.430
  1.430
  1.430
  1.430
  1.430
  1.430
  1.430
  1.430
  1.440
  1.440
  1.440
  1.440
  1.440
  1.440
Adjusted equity ratio
  0.368
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,319
  8,448
  13,648
  20,932
  30,820
  43,856
  60,590
  81,551
  107,224
  138,035
  174,334
  217,715
  265,714
  319,762
  379,893
  446,082
  518,256
  596,308
  680,109
  769,524
  864,420
  964,674
  1,070,187
  1,180,881
  1,296,710
  1,417,662
  1,543,757
  1,675,052
  1,811,641
  1,953,650
  2,101,243
Depreciation, amort., depletion, $m
  2,067
  2,272
  2,522
  2,873
  3,350
  3,981
  4,792
  5,812
  7,063
  8,568
  10,345
  10,593
  12,951
  15,610
  18,573
  21,838
  25,403
  29,262
  33,409
  37,838
  42,541
  47,513
  52,748
  58,242
  63,993
  70,000
  76,264
  82,788
  89,575
  96,632
  103,967
Funds from operations, $m
  12,671
  10,720
  16,170
  23,805
  34,169
  47,836
  65,382
  87,362
  114,287
  146,603
  184,679
  228,308
  278,665
  335,372
  398,466
  467,921
  543,659
  625,570
  713,518
  807,362
  906,961
  1,012,187
  1,122,935
  1,239,123
  1,360,704
  1,487,662
  1,620,021
  1,757,840
  1,901,215
  2,050,282
  2,205,209
Change in working capital, $m
  1,050
  -4,135
  -6,010
  -8,442
  -11,490
  -15,189
  -19,548
  -24,545
  -30,133
  -36,242
  -42,784
  -49,663
  -56,778
  -64,035
  -71,344
  -78,633
  -85,842
  -92,928
  -99,864
  -106,638
  -113,252
  -119,717
  -126,058
  -132,303
  -138,488
  -144,652
  -150,836
  -157,082
  -163,434
  -169,934
  -176,625
Cash from operations, $m
  11,621
  14,856
  22,180
  32,247
  45,660
  63,026
  84,930
  111,907
  144,420
  182,845
  227,463
  277,971
  335,443
  399,406
  469,810
  546,554
  629,502
  718,498
  813,383
  914,000
  1,020,212
  1,131,905
  1,248,993
  1,371,426
  1,499,192
  1,632,314
  1,770,857
  1,914,922
  2,064,649
  2,220,216
  2,381,834
Maintenance CAPEX, $m
  0
  -285
  -458
  -708
  -1,058
  -1,535
  -2,166
  -2,978
  -3,997
  -5,249
  -6,754
  -8,530
  -10,593
  -12,951
  -15,610
  -18,573
  -21,838
  -25,403
  -29,262
  -33,409
  -37,838
  -42,541
  -47,513
  -52,748
  -58,242
  -63,993
  -70,000
  -76,264
  -82,788
  -89,575
  -96,632
New CAPEX, $m
  -2,538
  -1,452
  -2,097
  -2,945
  -4,008
  -5,299
  -6,819
  -8,562
  -10,512
  -12,643
  -14,925
  -17,324
  -19,806
  -22,338
  -24,888
  -27,430
  -29,945
  -32,417
  -34,836
  -37,199
  -39,506
  -41,762
  -43,974
  -46,152
  -48,310
  -50,460
  -52,617
  -54,796
  -57,012
  -59,279
  -61,613
Cash from investing activities, $m
  -11,337
  -1,737
  -2,555
  -3,653
  -5,066
  -6,834
  -8,985
  -11,540
  -14,509
  -17,892
  -21,679
  -25,854
  -30,399
  -35,289
  -40,498
  -46,003
  -51,783
  -57,820
  -64,098
  -70,608
  -77,344
  -84,303
  -91,487
  -98,900
  -106,552
  -114,453
  -122,617
  -131,060
  -139,800
  -148,854
  -158,245
Free cash flow, $m
  284
  13,118
  19,626
  28,595
  40,593
  56,192
  75,945
  100,367
  129,911
  164,954
  205,785
  252,116
  305,044
  364,118
  429,313
  500,551
  577,718
  660,678
  749,284
  843,391
  942,868
  1,047,602
  1,157,506
  1,272,526
  1,392,640
  1,517,861
  1,648,240
  1,783,862
  1,924,850
  2,071,362
  2,223,589
Issuance/(repayment) of debt, $m
  4,244
  18,175
  26,473
  37,186
  50,612
  66,906
  86,104
  108,115
  132,730
  159,638
  188,455
  218,755
  250,097
  282,059
  314,257
  346,364
  378,117
  409,330
  439,881
  469,719
  498,850
  527,331
  555,260
  582,769
  610,013
  637,162
  664,400
  691,914
  719,893
  748,525
  777,995
Issuance/(repurchase) of shares, $m
  219
  4,203
  4,749
  4,909
  4,351
  2,638
  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  
  4,762
  22,378
  31,222
  42,095
  54,963
  69,544
  86,104
  108,115
  132,730
  159,638
  188,455
  218,755
  250,097
  282,059
  314,257
  346,364
  378,117
  409,330
  439,881
  469,719
  498,850
  527,331
  555,260
  582,769
  610,013
  637,162
  664,400
  691,914
  719,893
  748,525
  777,995
Total cash flow (excl. dividends), $m
  5,341
  35,495
  50,847
  70,690
  95,557
  125,736
  162,049
  208,482
  262,641
  324,592
  394,240
  470,871
  555,141
  646,177
  743,570
  846,914
  955,836
  1,070,008
  1,189,165
  1,313,110
  1,441,718
  1,574,932
  1,712,767
  1,855,296
  2,002,653
  2,155,023
  2,312,639
  2,475,775
  2,644,743
  2,819,887
  3,001,584
Retained Cash Flow (-), $m
  -9,324
  -12,650
  -18,397
  -25,841
  -35,171
  -46,494
  -59,835
  -75,131
  -92,236
  -110,935
  -130,960
  -152,016
  -173,796
  -196,007
  -218,382
  -240,693
  -262,760
  -284,449
  -305,680
  -326,415
  -346,658
  -366,450
  -385,859
  -404,975
  -423,907
  -442,774
  -461,702
  -480,821
  -500,265
  -520,162
  -540,640
Prev. year cash balance distribution, $m
 
  19,662
  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
 
  42,507
  32,451
  44,849
  60,386
  79,242
  102,214
  133,352
  170,405
  213,657
  263,280
  318,855
  381,345
  450,170
  525,188
  606,221
  693,076
  785,558
  883,485
  986,695
  1,095,059
  1,208,482
  1,326,908
  1,450,320
  1,578,746
  1,712,250
  1,850,938
  1,994,954
  2,144,478
  2,299,725
  2,460,943
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
 
  40,755
  29,708
  39,030
  49,721
  61,422
  74,181
  90,090
  106,507
  122,735
  138,027
  151,419
  162,733
  171,163
  176,315
  177,976
  176,125
  170,925
  162,702
  151,923
  139,149
  124,997
  110,098
  95,056
  80,409
  66,609
  54,001
  42,817
  33,178
  25,104
  18,530
Current shareholders' claim on cash, %
  100
  98.0
  96.7
  95.8
  95.3
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0

Alibaba Group Holding Limited is a holding company. Through its subsidiaries, the Company is engaged in online and mobile commerce through offering of products, services and technology that enable merchants, brands and other businesses to transform the way they market, sell and operate in the People's Republic of China (China) and internationally. Its businesses consist of core commerce, cloud computing, mobile media and entertainment, and other innovation initiatives. Through investee affiliates, it also participates in the logistics and local services sectors. Retail commerce in China operated by the Company includes the China online commerce destination (Taobao Marketplace); the China third-party platform for brands and retailers (Tmall), and the sales and marketing platform for flash sales (Juhuasuan). Wholesale commerce in China operated by the Company includes the China domestic wholesale marketplace (1688.com) and the wholesale marketplace for global trade (Alibaba.com).

FINANCIAL RATIOS  of  Alibaba Group Holding ADR (BABA)

Valuation Ratios
P/E Ratio 73.7
Price to Sales 20.3
Price to Book 11.4
Price to Tangible Book
Price to Cash Flow 40.1
Price to Free Cash Flow 51.2
Growth Rates
Sales Growth Rate 56.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 61.8%
Cap. Spend. - 3 Yr. Gr. Rate 29.7%
Financial Strength
Quick Ratio 10
Current Ratio 0
LT Debt to Equity 27.3%
Total Debt to Equity 32.6%
Interest Coverage 25
Management Effectiveness
Return On Assets 10.5%
Ret/ On Assets - 3 Yr. Avg. 15.9%
Return On Total Capital 13.5%
Ret/ On T. Cap. - 3 Yr. Avg. 20.3%
Return On Equity 17.5%
Return On Equity - 3 Yr. Avg. 27.6%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 63%
Gross Margin - 3 Yr. Avg. 65.9%
EBITDA Margin 48.5%
EBITDA Margin - 3 Yr. Avg. 62.4%
Operating Margin 29%
Oper. Margin - 3 Yr. Avg. 28.9%
Pre-Tax Margin 37.9%
Pre-Tax Margin - 3 Yr. Avg. 53.6%
Net Profit Margin 27.6%
Net Profit Margin - 3 Yr. Avg. 43.4%
Effective Tax Rate 22.9%
Eff/ Tax Rate - 3 Yr. Avg. 17.7%
Payout Ratio 0%

BABA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BABA stock intrinsic value calculation we used $22898 million for the last fiscal year's total revenue generated by Alibaba Group Holding ADR. The default revenue input number comes from 2017 income statement of Alibaba Group Holding 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 BABA stock valuation model: a) initial revenue growth rate of 60% 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 BABA is calculated based on our internal credit rating of Alibaba Group Holding 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 Alibaba Group Holding 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 BABA stock the variable cost ratio is equal to 69%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $473 million in the base year in the intrinsic value calculation for BABA 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 Alibaba Group Holding ADR.

Corporate tax rate of 27% is the nominal tax rate for Alibaba Group Holding 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 BABA 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 BABA are equal to 10.5%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Alibaba Group Holding 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 BABA is equal to -30.1%. 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 - $40767 million for Alibaba Group Holding 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 2559.24 million for Alibaba Group Holding 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 Alibaba Group Holding ADR at the current share price and the inputted number of shares is $471.9 billion.

RELATED COMPANIES Price Int.Val. Rating
WB Weibo ADR 129.62 455.87  str.buy
SINA Sina 119.63 476.23  str.buy
EBAY eBay 38.74 52.17  buy
AMZN Amazon.com 1,293.32 956.41  hold
BIDU Baidu ADR 254.96 513.62  str.buy
MSFT Microsoft 90.10 55.03  sell
AAPL Apple 179.26 271.08  str.buy

COMPANY NEWS

▶ How Google Is Increasing Its Presence in China   [Jan-19-18 02:02PM  Market Realist]
▶ YY Takes Flight As China Stocks Get Price Target Increases   [04:24PM  Investor's Business Daily]
▶ How eBays Exit Could Affect PayPal   [10:33AM  Market Realist]
▶ PayPal Inspired By Chinese Payment Apps   [10:30AM  Market Realist]
▶ After 564% Run, Can This Top Chinese Stock Keep Climbing?   [04:05PM  Investor's Business Daily]
▶ An Insiders View on PayPals Prospects   [12:34PM  Market Realist]
▶ Top Performing ETFs to Keep Watching in 2018   [10:17AM  InvestorPlace]
▶ Alibaba Doubled Down At CES In Vegas   [Jan-13-18 03:27PM  Barrons.com]
▶ [$$] Tencent Joins Asia-Tech Debt Rush With Its Biggest Bond Sale   [Jan-12-18 11:32PM  The Wall Street Journal]
▶ Tencent in a TKO Against Alibaba   [Jan-11-18 10:53PM  Bloomberg]
▶ The Real Risk of Owning JD.com Stock   [11:44AM  InvestorPlace]
▶ Is Amazon Going to Rule the World?   [05:33AM  MarketWatch]
▶ How Altaba, Inc. Shares Rose 81% in 2017   [04:40PM  Motley Fool]
▶ Company News For Jan 10, 2018   [10:14AM  Zacks]
▶ How Alphabet Stock Has Performed Recently   [07:33AM  Market Realist]
▶ How APAC Compares with Alphabets Other Regions   [Jan-09-18 10:34AM  Market Realist]
▶ [$$] How to Play Alibaba Now   [05:00PM  Barrons.com]
▶ Alibaba Launches Major Expansion Of Supermarkets In Beijing   [04:50PM  Investor's Business Daily]
Financial statements of BABA
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.