Intrinsic value of Baidu ADR - BIDU

Previous Close

$222.67

  Intrinsic Value

$4,789

stock screener

  Rating & Target

str. buy

+999%

Previous close

$222.67

 
Intrinsic value

$4,789

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BIDU 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 7.8

 

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, %
  26.20
  24.08
  22.17
  20.45
  18.91
  17.52
  16.27
  15.14
  14.13
  13.21
  12.39
  11.65
  10.99
  10.39
  9.85
  9.36
  8.93
  8.54
  8.18
  7.86
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
Revenue, $m
  16,178
  20,073
  24,524
  29,540
  35,126
  41,279
  47,994
  55,260
  63,066
  71,399
  80,247
  89,598
  99,443
  109,774
  120,586
  131,879
  143,654
  155,916
  168,673
  181,937
  195,723
  210,049
  224,937
  240,410
  256,496
  273,225
  290,628
  308,743
  327,605
  347,257
Variable operating expenses, $m
  10,464
  12,906
  15,696
  18,841
  22,343
  26,200
  30,410
  34,965
  39,859
  45,083
  50,309
  56,171
  62,343
  68,819
  75,598
  82,678
  90,060
  97,747
  105,744
  114,060
  122,703
  131,684
  141,017
  150,718
  160,803
  171,290
  182,201
  193,557
  205,382
  217,702
Fixed operating expenses, $m
  2,176
  2,224
  2,273
  2,323
  2,374
  2,426
  2,479
  2,534
  2,590
  2,647
  2,705
  2,764
  2,825
  2,887
  2,951
  3,016
  3,082
  3,150
  3,219
  3,290
  3,362
  3,436
  3,512
  3,589
  3,668
  3,749
  3,831
  3,916
  4,002
  4,090
Total operating expenses, $m
  12,640
  15,130
  17,969
  21,164
  24,717
  28,626
  32,889
  37,499
  42,449
  47,730
  53,014
  58,935
  65,168
  71,706
  78,549
  85,694
  93,142
  100,897
  108,963
  117,350
  126,065
  135,120
  144,529
  154,307
  164,471
  175,039
  186,032
  197,473
  209,384
  221,792
Operating income, $m
  3,538
  4,944
  6,555
  8,377
  10,410
  12,653
  15,105
  17,761
  20,618
  23,670
  27,234
  30,663
  34,275
  38,067
  42,038
  46,186
  50,512
  55,019
  59,709
  64,587
  69,658
  74,929
  80,408
  86,103
  92,025
  98,186
  104,596
  111,270
  118,221
  125,465
EBITDA, $m
  4,458
  6,008
  7,784
  9,791
  12,031
  14,502
  17,202
  20,127
  23,273
  26,633
  30,203
  33,978
  37,954
  42,129
  46,499
  51,065
  55,828
  60,788
  65,950
  71,319
  76,900
  82,701
  88,730
  94,998
  101,516
  108,295
  115,350
  122,694
  130,343
  138,313
Interest expense (income), $m
  161
  292
  566
  884
  1,248
  1,659
  2,116
  2,619
  3,168
  3,763
  4,401
  5,083
  5,806
  6,571
  7,377
  8,222
  9,106
  10,030
  10,993
  11,996
  13,040
  14,124
  15,252
  16,424
  17,642
  18,907
  20,223
  21,592
  23,015
  24,497
  26,040
Earnings before tax, $m
  3,246
  4,378
  5,671
  7,128
  8,751
  10,537
  12,486
  14,593
  16,855
  19,269
  22,151
  24,857
  27,704
  30,691
  33,816
  37,080
  40,482
  44,026
  47,713
  51,547
  55,533
  59,677
  63,983
  68,461
  73,118
  77,962
  83,005
  88,255
  93,724
  99,425
Tax expense, $m
  876
  1,182
  1,531
  1,925
  2,363
  2,845
  3,371
  3,940
  4,551
  5,203
  5,981
  6,711
  7,480
  8,286
  9,130
  10,012
  10,930
  11,887
  12,883
  13,918
  14,994
  16,113
  17,276
  18,485
  19,742
  21,050
  22,411
  23,829
  25,306
  26,845
Net income, $m
  2,370
  3,196
  4,140
  5,204
  6,388
  7,692
  9,115
  10,653
  12,304
  14,066
  16,170
  18,145
  20,224
  22,404
  24,686
  27,068
  29,552
  32,139
  34,831
  37,630
  40,539
  43,564
  46,708
  49,977
  53,376
  56,913
  60,593
  64,426
  68,419
  72,580

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
  39,846
  49,441
  60,403
  72,759
  86,517
  101,673
  118,212
  136,109
  155,336
  175,861
  197,653
  220,686
  244,933
  270,379
  297,011
  324,826
  353,828
  384,029
  415,450
  448,120
  482,076
  517,363
  554,032
  592,143
  631,764
  672,967
  715,833
  760,450
  806,909
  855,312
Adjusted assets (=assets-cash), $m
  39,846
  49,441
  60,403
  72,759
  86,517
  101,673
  118,212
  136,109
  155,336
  175,861
  197,653
  220,686
  244,933
  270,379
  297,011
  324,826
  353,828
  384,029
  415,450
  448,120
  482,076
  517,363
  554,032
  592,143
  631,764
  672,967
  715,833
  760,450
  806,909
  855,312
Revenue / Adjusted assets
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
Average production assets, $m
  5,986
  7,427
  9,074
  10,930
  12,997
  15,273
  17,758
  20,446
  23,335
  26,418
  29,692
  33,151
  36,794
  40,616
  44,617
  48,795
  53,152
  57,689
  62,409
  67,317
  72,417
  77,718
  83,227
  88,952
  94,904
  101,093
  107,532
  114,235
  121,214
  128,485
Working capital, $m
  -5,274
  -6,544
  -7,995
  -9,630
  -11,451
  -13,457
  -15,646
  -18,015
  -20,560
  -23,276
  -26,161
  -29,209
  -32,418
  -35,786
  -39,311
  -42,993
  -46,831
  -50,828
  -54,987
  -59,311
  -63,806
  -68,476
  -73,329
  -78,374
  -83,618
  -89,071
  -94,745
  -100,650
  -106,799
  -113,206
Total debt, $m
  10,476
  16,377
  23,119
  30,717
  39,178
  48,500
  58,671
  69,678
  81,502
  94,125
  107,527
  121,692
  136,605
  152,254
  168,632
  185,738
  203,574
  222,148
  241,472
  261,564
  282,447
  304,149
  326,700
  350,139
  374,505
  399,845
  426,208
  453,647
  482,220
  511,988
Total liabilities, $m
  24,505
  30,406
  37,148
  44,747
  53,208
  62,529
  72,700
  83,707
  95,532
  108,154
  121,557
  135,722
  150,634
  166,283
  182,662
  199,768
  217,604
  236,178
  255,502
  275,594
  296,477
  318,178
  340,729
  364,168
  388,535
  413,875
  440,238
  467,677
  496,249
  526,017
Total equity, $m
  15,341
  19,035
  23,255
  28,012
  33,309
  39,144
  45,512
  52,402
  59,804
  67,706
  76,097
  84,964
  94,299
  104,096
  114,349
  125,058
  136,224
  147,851
  159,948
  172,526
  185,599
  199,185
  213,302
  227,975
  243,229
  259,092
  275,596
  292,773
  310,660
  329,295
Total liabilities and equity, $m
  39,846
  49,441
  60,403
  72,759
  86,517
  101,673
  118,212
  136,109
  155,336
  175,860
  197,654
  220,686
  244,933
  270,379
  297,011
  324,826
  353,828
  384,029
  415,450
  448,120
  482,076
  517,363
  554,031
  592,143
  631,764
  672,967
  715,834
  760,450
  806,909
  855,312
Debt-to-equity ratio
  0.680
  0.860
  0.990
  1.100
  1.180
  1.240
  1.290
  1.330
  1.360
  1.390
  1.410
  1.430
  1.450
  1.460
  1.470
  1.490
  1.490
  1.500
  1.510
  1.520
  1.520
  1.530
  1.530
  1.540
  1.540
  1.540
  1.550
  1.550
  1.550
  1.550
Adjusted equity ratio
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385
  0.385

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,370
  3,196
  4,140
  5,204
  6,388
  7,692
  9,115
  10,653
  12,304
  14,066
  16,170
  18,145
  20,224
  22,404
  24,686
  27,068
  29,552
  32,139
  34,831
  37,630
  40,539
  43,564
  46,708
  49,977
  53,376
  56,913
  60,593
  64,426
  68,419
  72,580
Depreciation, amort., depletion, $m
  920
  1,064
  1,229
  1,414
  1,621
  1,849
  2,097
  2,366
  2,655
  2,963
  2,969
  3,315
  3,679
  4,062
  4,462
  4,880
  5,315
  5,769
  6,241
  6,732
  7,242
  7,772
  8,323
  8,895
  9,490
  10,109
  10,753
  11,423
  12,121
  12,848
Funds from operations, $m
  3,290
  4,260
  5,369
  6,618
  8,009
  9,541
  11,212
  13,019
  14,959
  17,029
  19,139
  21,460
  23,903
  26,466
  29,147
  31,948
  34,867
  37,908
  41,072
  44,361
  47,781
  51,336
  55,031
  58,872
  62,866
  67,022
  71,347
  75,849
  80,540
  85,429
Change in working capital, $m
  -1,095
  -1,270
  -1,451
  -1,635
  -1,821
  -2,006
  -2,189
  -2,369
  -2,545
  -2,717
  -2,884
  -3,048
  -3,209
  -3,368
  -3,525
  -3,681
  -3,839
  -3,997
  -4,159
  -4,324
  -4,494
  -4,670
  -4,853
  -5,044
  -5,244
  -5,454
  -5,674
  -5,905
  -6,149
  -6,406
Cash from operations, $m
  4,384
  5,530
  6,819
  8,253
  9,830
  11,547
  13,401
  15,388
  17,504
  19,746
  22,024
  24,509
  27,112
  29,834
  32,672
  35,629
  38,706
  41,905
  45,230
  48,685
  52,275
  56,006
  59,884
  63,916
  68,110
  72,475
  77,020
  81,755
  86,689
  91,835
Maintenance CAPEX, $m
  -475
  -599
  -743
  -907
  -1,093
  -1,300
  -1,527
  -1,776
  -2,045
  -2,333
  -2,642
  -2,969
  -3,315
  -3,679
  -4,062
  -4,462
  -4,880
  -5,315
  -5,769
  -6,241
  -6,732
  -7,242
  -7,772
  -8,323
  -8,895
  -9,490
  -10,109
  -10,753
  -11,423
  -12,121
New CAPEX, $m
  -1,239
  -1,441
  -1,647
  -1,856
  -2,067
  -2,277
  -2,484
  -2,689
  -2,888
  -3,083
  -3,274
  -3,460
  -3,643
  -3,822
  -4,001
  -4,178
  -4,357
  -4,537
  -4,720
  -4,908
  -5,101
  -5,301
  -5,508
  -5,725
  -5,952
  -6,190
  -6,439
  -6,702
  -6,979
  -7,271
Cash from investing activities, $m
  -1,714
  -2,040
  -2,390
  -2,763
  -3,160
  -3,577
  -4,011
  -4,465
  -4,933
  -5,416
  -5,916
  -6,429
  -6,958
  -7,501
  -8,063
  -8,640
  -9,237
  -9,852
  -10,489
  -11,149
  -11,833
  -12,543
  -13,280
  -14,048
  -14,847
  -15,680
  -16,548
  -17,455
  -18,402
  -19,392
Free cash flow, $m
  2,671
  3,490
  4,430
  5,490
  6,670
  7,971
  9,389
  10,923
  12,571
  14,329
  16,108
  18,080
  20,155
  22,332
  24,610
  26,989
  29,470
  32,053
  34,741
  37,537
  40,443
  43,464
  46,604
  49,868
  53,263
  56,796
  60,472
  64,299
  68,287
  72,443
Issuance/(repayment) of debt, $m
  5,063
  5,901
  6,742
  7,599
  8,461
  9,321
  10,171
  11,007
  11,824
  12,623
  13,402
  14,165
  14,912
  15,649
  16,379
  17,106
  17,836
  18,574
  19,324
  20,092
  20,883
  21,701
  22,552
  23,439
  24,367
  25,340
  26,363
  27,439
  28,573
  29,768
Issuance/(repurchase) of shares, $m
  804
  498
  81
  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  
  5,867
  6,399
  6,823
  7,599
  8,461
  9,321
  10,171
  11,007
  11,824
  12,623
  13,402
  14,165
  14,912
  15,649
  16,379
  17,106
  17,836
  18,574
  19,324
  20,092
  20,883
  21,701
  22,552
  23,439
  24,367
  25,340
  26,363
  27,439
  28,573
  29,768
Total cash flow (excl. dividends), $m
  8,538
  9,889
  11,252
  13,089
  15,132
  17,292
  19,560
  21,930
  24,395
  26,952
  29,511
  32,245
  35,067
  37,981
  40,989
  44,095
  47,306
  50,627
  54,065
  57,629
  61,326
  65,165
  69,155
  73,307
  77,630
  82,136
  86,834
  91,738
  96,859
  102,210
Retained Cash Flow (-), $m
  -3,173
  -3,694
  -4,220
  -4,757
  -5,297
  -5,835
  -6,367
  -6,890
  -7,402
  -7,902
  -8,390
  -8,867
  -9,335
  -9,797
  -10,253
  -10,709
  -11,166
  -11,627
  -12,097
  -12,578
  -13,073
  -13,585
  -14,118
  -14,673
  -15,254
  -15,863
  -16,504
  -17,177
  -17,887
  -18,635
Prev. year cash balance distribution, $m
  5,267
  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
  487
  615
  763
  932
  1,123
  1,335
  1,569
  1,824
  2,100
  2,397
  2,713
  3,049
  3,405
  3,779
  4,171
  4,582
  5,011
  5,459
  5,925
  6,410
  6,914
  7,437
  7,982
  8,548
  9,136
  9,747
  10,383
  11,044
  11,732
  12,449
Cash available for distribution, $m
  10,631
  6,195
  7,032
  8,332
  9,835
  11,457
  13,193
  15,040
  16,993
  19,050
  21,121
  23,377
  25,732
  28,184
  30,735
  33,386
  36,140
  39,000
  41,968
  45,051
  48,253
  51,580
  55,038
  58,634
  62,376
  66,272
  70,331
  74,561
  78,972
  83,575
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
  10,193
  5,671
  6,120
  6,860
  7,623
  8,315
  8,913
  9,400
  9,762
  9,987
  10,030
  9,976
  9,784
  9,462
  9,023
  8,484
  7,864
  7,182
  6,462
  5,725
  4,991
  4,280
  3,607
  2,986
  2,427
  1,933
  1,510
  1,154
  862
  629
Current shareholders' claim on cash, %
  91.4
  87.3
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8
  86.8

Baidu, Inc. is a Chinese language Internet search provider. The Company offers a Chinese language search platform on its Baidu.com Website that enables users to find information online, including Webpages, news, images, documents and multimedia files, through links provided on its Website. In addition to serving individual Internet search users, the Company provides a platform for businesses to reach customers. Its business consists of three segments: search services, transaction services and iQiyi. Search services are keyword-based marketing services targeted at and triggered by Internet users' search queries, which mainly include its pay-for-performance (P4P) services and other online marketing services. Its transaction services include Baidu Nuomi, Baidu Takeout Delivery, Baidu Maps, Baidu Connect, Baidu Wallet and others. iQiyi is an online video platform with a content library that includes licensed movies, television series, cartoons, variety shows and other programs.

FINANCIAL RATIOS  of  Baidu ADR (BIDU)

Valuation Ratios
P/E Ratio 4.8
Price to Sales 0.8
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow 4.5
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 35.1%
Cap. Spend. - 3 Yr. Gr. Rate 23.3%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 37.4%
Total Debt to Equity 48%
Interest Coverage 14
Management Effectiveness
Return On Assets 7.3%
Ret/ On Assets - 3 Yr. Avg. 17%
Return On Total Capital 8.8%
Ret/ On T. Cap. - 3 Yr. Avg. 21.1%
Return On Equity 12.8%
Return On Equity - 3 Yr. Avg. 31%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 50%
Gross Margin - 3 Yr. Avg. 56.7%
EBITDA Margin 33.9%
EBITDA Margin - 3 Yr. Avg. 46.7%
Operating Margin 14.2%
Oper. Margin - 3 Yr. Avg. 19.3%
Pre-Tax Margin 20.6%
Pre-Tax Margin - 3 Yr. Avg. 35.7%
Net Profit Margin 15.7%
Net Profit Margin - 3 Yr. Avg. 30.9%
Effective Tax Rate 20.1%
Eff/ Tax Rate - 3 Yr. Avg. 16.6%
Payout Ratio 0%

BIDU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BIDU stock intrinsic value calculation we used $12819 million for the last fiscal year's total revenue generated by Baidu ADR. The default revenue input number comes from 2017 income statement of Baidu 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 BIDU stock valuation model: a) initial revenue growth rate of 26.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BIDU is calculated based on our internal credit rating of Baidu 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 Baidu 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 BIDU stock the variable cost ratio is equal to 65.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2129 million in the base year in the intrinsic value calculation for BIDU 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 Baidu ADR.

Corporate tax rate of 27% is the nominal tax rate for Baidu 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 BIDU stock is equal to 3.8%.

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 BIDU are equal to 37%.

Life of production assets of 10 years is the average useful life of capital assets used in Baidu 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 BIDU is equal to -32.6%. 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 - $17434 million for Baidu 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 35 million for Baidu 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 Baidu ADR at the current share price and the inputted number of shares is $7.8 billion.

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COMPANY NEWS

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▶ Why Alibaba, Tencent, Baidu Can Rise 20%   [12:45PM  Investopedia]
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▶ [$$] Y Combinator Launching China Program, With Baidu's Qi Lu as Head   [Aug-14-18 11:04PM  The Wall Street Journal]
▶ Tesla Rival Nio Files for $1.8B US IPO   [10:15AM  Investopedia]
▶ A Couple of Bad Days for Baidu and TripAdvisor   [Aug-10-18 04:00PM  Motley Fool]
▶ IQ Stock is the Latest Hot Issue from China   [Aug-09-18 11:36PM  InvestorPlace]
▶ Is Baidu at Risk From a Suddenly Submissive Alphabet?   [Aug-07-18 08:39PM  Motley Fool]
▶ Googles Potential Return to China Shouldnt Scare Baidu   [Aug-06-18 04:17PM  Motley Fool]
▶ Baidu Crushed It Again -- So Why Is the Stock Falling?   [Aug-05-18 05:03PM  Motley Fool]
▶ Are Sohu.coms High-Growth Days Over?   [08:11AM  Motley Fool]
▶ Baidu Stock Is Ripe for a Bullish Trade Right Now   [Aug-03-18 11:35AM  InvestorPlace]
▶ [$$] Googles Road Back to China Littered With Obstacles   [Aug-02-18 07:42PM  The Wall Street Journal]
▶ Trump Torpedoes China Stocks With Escalating Trade War Threats   [03:02PM  Investor's Business Daily]
▶ [$$] Google's Road Back to China Littered With Obstacles   [06:41AM  The Wall Street Journal]
▶ Stocks End Mixed on Fed, Trade Worries   [04:06PM  TheStreet.com]
▶ Wednesday Wrap-Up: You Gotta Invest   [03:57PM  TheStreet.com]
▶ Baidu Keeps the Growth Coming   [08:45AM  Motley Fool]
▶ Baidu (BIDU) Stock Rises on Q2 Earnings Beat   [08:06PM  InvestorPlace]
▶ IQIYI Shares Jump on Strong Forecast   [07:21PM  Bloomberg]
▶ Baidu Inc.: 2Q Earnings Snapshot   [06:52PM  Associated Press]
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