Intrinsic value of Alibaba Group Holding ADR - BABA

Previous Close

$172.78

  Intrinsic Value

$239.02

stock screener

  Rating & Target

buy

+38%

Previous close

$172.78

 
Intrinsic value

$239.02

 
Up/down potential

+38%

 
Rating

buy

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

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 430.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  46.90
  42.71
  38.94
  35.55
  32.49
  29.74
  27.27
  25.04
  23.04
  21.23
  19.61
  18.15
  16.83
  15.65
  14.59
  13.63
  12.76
  11.99
  11.29
  10.66
  10.09
  9.58
  9.13
  8.71
  8.34
  8.01
  7.71
  7.44
  7.19
  6.97
Revenue, $m
  33,740
  48,150
  66,900
  90,679
  120,141
  155,873
  198,376
  248,050
  305,193
  369,994
  442,548
  522,865
  610,883
  706,489
  809,533
  919,846
  1,037,257
  1,161,601
  1,292,733
  1,430,540
  1,574,939
  1,725,892
  1,883,400
  2,047,511
  2,218,319
  2,395,962
  2,580,623
  2,772,530
  2,971,954
  3,179,204
Variable operating expenses, $m
  21,354
  29,581
  40,284
  53,860
  70,679
  91,077
  115,341
  143,699
  176,320
  213,314
  252,641
  298,492
  348,739
  403,318
  462,144
  525,120
  592,147
  663,132
  737,992
  816,663
  899,097
  985,273
  1,075,191
  1,168,878
  1,266,388
  1,367,801
  1,473,220
  1,582,775
  1,696,622
  1,814,936
Fixed operating expenses, $m
  815
  832
  851
  869
  889
  908
  928
  949
  969
  991
  1,013
  1,035
  1,058
  1,081
  1,105
  1,129
  1,154
  1,179
  1,205
  1,232
  1,259
  1,286
  1,315
  1,344
  1,373
  1,403
  1,434
  1,466
  1,498
  1,531
Total operating expenses, $m
  22,169
  30,413
  41,135
  54,729
  71,568
  91,985
  116,269
  144,648
  177,289
  214,305
  253,654
  299,527
  349,797
  404,399
  463,249
  526,249
  593,301
  664,311
  739,197
  817,895
  900,356
  986,559
  1,076,506
  1,170,222
  1,267,761
  1,369,204
  1,474,654
  1,584,241
  1,698,120
  1,816,467
Operating income, $m
  11,571
  17,737
  25,764
  35,950
  48,574
  63,888
  82,106
  103,402
  127,903
  155,689
  188,895
  223,338
  261,086
  302,089
  346,284
  393,598
  443,956
  497,290
  553,536
  612,645
  674,583
  739,332
  806,894
  877,289
  950,557
  1,026,757
  1,105,969
  1,188,289
  1,273,834
  1,362,737
EBITDA, $m
  16,593
  24,009
  33,664
  45,914
  61,095
  79,510
  101,418
  127,026
  156,486
  189,897
  227,308
  268,723
  314,111
  363,412
  416,551
  473,440
  533,990
  598,117
  665,745
  736,816
  811,288
  889,140
  970,373
  1,055,013
  1,143,107
  1,234,727
  1,329,967
  1,428,945
  1,531,799
  1,638,692
Interest expense (income), $m
  357
  602
  1,385
  2,433
  3,797
  5,526
  7,668
  10,266
  13,357
  16,969
  21,124
  25,836
  31,112
  36,953
  43,353
  50,305
  57,798
  65,819
  74,357
  83,399
  92,934
  102,955
  113,455
  124,432
  135,885
  147,819
  160,239
  173,157
  186,584
  200,539
  215,040
Earnings before tax, $m
  10,969
  16,352
  23,331
  32,153
  43,048
  56,219
  71,840
  90,045
  110,933
  134,565
  163,058
  192,226
  224,133
  258,736
  295,979
  335,800
  378,137
  422,933
  470,137
  519,711
  571,628
  625,877
  682,463
  741,404
  802,739
  866,518
  932,812
  1,001,705
  1,073,295
  1,147,696
Tax expense, $m
  2,962
  4,415
  6,299
  8,681
  11,623
  15,179
  19,397
  24,312
  29,952
  36,332
  44,026
  51,901
  60,516
  69,859
  79,914
  90,666
  102,097
  114,192
  126,937
  140,322
  154,340
  168,987
  184,265
  200,179
  216,739
  233,960
  251,859
  270,460
  289,790
  309,878
Net income, $m
  8,007
  11,937
  17,032
  23,472
  31,425
  41,040
  52,443
  65,733
  80,981
  98,232
  119,033
  140,325
  163,617
  188,877
  216,065
  245,134
  276,040
  308,741
  343,200
  379,389
  417,288
  456,890
  498,198
  541,225
  585,999
  632,558
  680,953
  731,244
  783,505
  837,818

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  95,852
  136,791
  190,056
  257,611
  341,311
  442,822
  563,567
  704,688
  867,024
  1,051,119
  1,257,239
  1,485,412
  1,735,463
  2,007,070
  2,299,809
  2,613,200
  2,946,753
  3,300,002
  3,672,538
  4,064,033
  4,474,259
  4,903,101
  5,350,567
  5,816,793
  6,302,042
  6,806,709
  7,331,315
  7,876,507
  8,443,050
  9,031,830
Adjusted assets (=assets-cash), $m
  95,852
  136,791
  190,056
  257,611
  341,311
  442,822
  563,567
  704,688
  867,024
  1,051,119
  1,257,239
  1,485,412
  1,735,463
  2,007,070
  2,299,809
  2,613,200
  2,946,753
  3,300,002
  3,672,538
  4,064,033
  4,474,259
  4,903,101
  5,350,567
  5,816,793
  6,302,042
  6,806,709
  7,331,315
  7,876,507
  8,443,050
  9,031,830
Revenue / Adjusted assets
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
  0.352
Average production assets, $m
  29,286
  41,794
  58,069
  78,709
  104,283
  135,298
  172,190
  215,308
  264,907
  321,155
  384,132
  453,847
  530,246
  613,232
  702,674
  798,427
  900,339
  1,008,269
  1,122,092
  1,241,708
  1,367,047
  1,498,074
  1,634,791
  1,777,240
  1,925,501
  2,079,695
  2,239,981
  2,406,556
  2,579,656
  2,759,549
Working capital, $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 debt, $m
  25,657
  45,062
  70,309
  102,331
  142,004
  190,120
  247,354
  314,245
  391,192
  478,453
  576,154
  684,308
  802,832
  931,574
  1,070,332
  1,218,880
  1,376,984
  1,544,424
  1,721,006
  1,906,574
  2,101,022
  2,304,293
  2,516,392
  2,737,383
  2,967,391
  3,206,603
  3,455,266
  3,713,687
  3,982,229
  4,261,310
Total liabilities, $m
  45,434
  64,839
  90,086
  122,108
  161,781
  209,897
  267,131
  334,022
  410,970
  498,230
  595,931
  704,085
  822,609
  951,351
  1,090,109
  1,238,657
  1,396,761
  1,564,201
  1,740,783
  1,926,352
  2,120,799
  2,324,070
  2,536,169
  2,757,160
  2,987,168
  3,226,380
  3,475,043
  3,733,464
  4,002,006
  4,281,087
Total equity, $m
  50,418
  71,952
  99,969
  135,503
  179,529
  232,924
  296,436
  370,666
  456,055
  552,889
  661,308
  781,326
  912,853
  1,055,719
  1,209,699
  1,374,543
  1,549,992
  1,735,801
  1,931,755
  2,137,681
  2,353,460
  2,579,031
  2,814,398
  3,059,633
  3,314,874
  3,580,329
  3,856,272
  4,143,043
  4,441,044
  4,750,743
Total liabilities and equity, $m
  95,852
  136,791
  190,055
  257,611
  341,310
  442,821
  563,567
  704,688
  867,025
  1,051,119
  1,257,239
  1,485,411
  1,735,462
  2,007,070
  2,299,808
  2,613,200
  2,946,753
  3,300,002
  3,672,538
  4,064,033
  4,474,259
  4,903,101
  5,350,567
  5,816,793
  6,302,042
  6,806,709
  7,331,315
  7,876,507
  8,443,050
  9,031,830
Debt-to-equity ratio
  0.510
  0.630
  0.700
  0.760
  0.790
  0.820
  0.830
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.900
  0.900
  0.900
  0.900
  0.900
  0.900
Adjusted equity ratio
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526
  0.526

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  8,007
  11,937
  17,032
  23,472
  31,425
  41,040
  52,443
  65,733
  80,981
  98,232
  119,033
  140,325
  163,617
  188,877
  216,065
  245,134
  276,040
  308,741
  343,200
  379,389
  417,288
  456,890
  498,198
  541,225
  585,999
  632,558
  680,953
  731,244
  783,505
  837,818
Depreciation, amort., depletion, $m
  5,022
  6,272
  7,900
  9,964
  12,521
  15,623
  19,312
  23,624
  28,584
  34,208
  38,413
  45,385
  53,025
  61,323
  70,267
  79,843
  90,034
  100,827
  112,209
  124,171
  136,705
  149,807
  163,479
  177,724
  192,550
  207,969
  223,998
  240,656
  257,966
  275,955
Funds from operations, $m
  13,029
  18,209
  24,932
  33,436
  43,946
  56,663
  71,755
  89,357
  109,565
  132,441
  157,446
  185,710
  216,642
  250,201
  286,332
  324,977
  366,074
  409,568
  455,409
  503,560
  553,993
  606,698
  661,677
  718,949
  778,549
  840,528
  904,951
  971,900
  1,041,471
  1,113,773
Change in working capital, $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 from operations, $m
  13,029
  18,209
  24,932
  33,436
  43,946
  56,663
  71,755
  89,357
  109,565
  132,441
  157,446
  185,710
  216,642
  250,201
  286,332
  324,977
  366,074
  409,568
  455,409
  503,560
  553,993
  606,698
  661,677
  718,949
  778,549
  840,528
  904,951
  971,900
  1,041,471
  1,113,773
Maintenance CAPEX, $m
  -1,993
  -2,929
  -4,179
  -5,807
  -7,871
  -10,428
  -13,530
  -17,219
  -21,531
  -26,491
  -32,115
  -38,413
  -45,385
  -53,025
  -61,323
  -70,267
  -79,843
  -90,034
  -100,827
  -112,209
  -124,171
  -136,705
  -149,807
  -163,479
  -177,724
  -192,550
  -207,969
  -223,998
  -240,656
  -257,966
New CAPEX, $m
  -9,352
  -12,508
  -16,274
  -20,641
  -25,573
  -31,015
  -36,892
  -43,118
  -49,600
  -56,248
  -62,977
  -69,715
  -76,400
  -82,986
  -89,442
  -95,752
  -101,912
  -107,930
  -113,823
  -119,616
  -125,339
  -131,027
  -136,717
  -142,449
  -148,261
  -154,194
  -160,286
  -166,576
  -173,099
  -179,893
Cash from investing activities, $m
  -11,345
  -15,437
  -20,453
  -26,448
  -33,444
  -41,443
  -50,422
  -60,337
  -71,131
  -82,739
  -95,092
  -108,128
  -121,785
  -136,011
  -150,765
  -166,019
  -181,755
  -197,964
  -214,650
  -231,825
  -249,510
  -267,732
  -286,524
  -305,928
  -325,985
  -346,744
  -368,255
  -390,574
  -413,755
  -437,859
Free cash flow, $m
  1,683
  2,772
  4,478
  6,988
  10,502
  15,219
  21,333
  29,020
  38,435
  49,702
  62,353
  77,582
  94,858
  114,190
  135,567
  158,957
  184,319
  211,604
  240,759
  271,735
  304,483
  338,966
  375,152
  413,021
  452,564
  493,784
  536,696
  581,326
  627,716
  675,914
Issuance/(repayment) of debt, $m
  14,507
  19,405
  25,248
  32,021
  39,674
  48,116
  57,234
  66,891
  76,947
  87,261
  97,701
  108,154
  118,524
  128,742
  138,758
  148,547
  158,104
  167,440
  176,582
  185,569
  194,447
  203,271
  212,099
  220,991
  230,008
  239,212
  248,663
  258,421
  268,542
  279,082
Issuance/(repurchase) of shares, $m
  8,067
  9,597
  10,986
  12,062
  12,601
  12,355
  11,069
  8,496
  4,407
  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  
  22,574
  29,002
  36,234
  44,083
  52,275
  60,471
  68,303
  75,387
  81,354
  87,261
  97,701
  108,154
  118,524
  128,742
  138,758
  148,547
  158,104
  167,440
  176,582
  185,569
  194,447
  203,271
  212,099
  220,991
  230,008
  239,212
  248,663
  258,421
  268,542
  279,082
Total cash flow (excl. dividends), $m
  24,257
  31,774
  40,711
  51,072
  62,776
  75,690
  89,636
  104,408
  119,789
  136,963
  160,054
  185,735
  213,382
  242,932
  274,325
  307,504
  342,423
  379,044
  417,341
  457,303
  498,931
  542,238
  587,251
  634,012
  682,572
  732,996
  785,359
  839,747
  896,257
  954,996
Retained Cash Flow (-), $m
  -16,074
  -21,534
  -28,017
  -35,534
  -44,026
  -53,395
  -63,512
  -74,230
  -85,389
  -96,834
  -108,419
  -120,019
  -131,527
  -142,865
  -153,981
  -164,844
  -175,449
  -185,809
  -195,954
  -205,926
  -215,779
  -225,571
  -235,367
  -245,235
  -255,241
  -265,455
  -275,943
  -286,771
  -298,002
  -309,698
Prev. year cash balance distribution, $m
  6,114
  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
  2,113
  3,104
  4,430
  6,155
  8,342
  11,053
  14,340
  18,251
  22,821
  28,078
  34,039
  40,714
  48,104
  56,201
  64,997
  74,477
  84,626
  95,428
  106,867
  118,931
  131,610
  144,894
  158,782
  173,273
  188,371
  204,085
  220,428
  237,417
  255,073
  273,420
Cash available for distribution, $m
  14,297
  10,240
  12,694
  15,538
  18,751
  22,295
  26,123
  30,178
  34,401
  40,129
  51,635
  65,717
  81,855
  100,067
  120,344
  142,660
  166,974
  193,235
  221,387
  251,377
  283,152
  316,666
  351,884
  388,777
  427,331
  467,541
  509,416
  552,976
  598,255
  645,298
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
  13,708
  9,375
  11,047
  12,794
  14,534
  16,181
  17,649
  18,862
  19,761
  21,038
  24,521
  28,044
  31,123
  33,594
  35,331
  36,253
  36,331
  35,586
  34,087
  31,942
  29,287
  26,275
  23,063
  19,801
  16,624
  13,641
  10,934
  8,555
  6,531
  4,859
Current shareholders' claim on cash, %
  97.7
  95.9
  94.4
  93.3
  92.5
  91.8
  91.4
  91.1
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0
  91.0

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 69
Price to Sales 19
Price to Book 10.7
Price to Tangible Book
Price to Cash Flow 37.5
Price to Free Cash Flow 48
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 $22968 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 46.9% 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 66.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $797 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 5.4% 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 9.2%.

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 86.8%.

Life of production assets of 10 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 0%. 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 - $40458 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 2493 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 $430.7 billion.

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