Intrinsic value of Baidu ADR - BIDU

Previous Close

$255.98

  Intrinsic Value

$513.62

stock screener

  Rating & Target

str. buy

+101%

Previous close

$255.98

 
Intrinsic value

$513.62

 
Up/down potential

+101%

 
Rating

str. buy

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

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

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
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, %
  6.28
  28.70
  26.33
  24.20
  22.28
  20.55
  18.99
  17.60
  16.34
  15.20
  14.18
  13.26
  12.44
  11.69
  11.02
  10.42
  9.88
  9.39
  8.95
  8.56
  8.20
  7.88
  7.59
  7.33
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
Revenue, $m
  10,207
  13,136
  16,595
  20,611
  25,202
  30,381
  36,152
  42,513
  49,458
  56,976
  65,057
  73,686
  82,850
  92,538
  102,740
  113,447
  124,656
  136,363
  148,571
  161,284
  174,512
  188,266
  202,561
  217,417
  232,855
  248,900
  265,579
  282,925
  300,970
  319,752
  339,309
Variable operating expenses, $m
 
  10,761
  13,536
  16,757
  20,441
  24,595
  29,225
  34,328
  39,900
  45,931
  52,414
  59,114
  66,467
  74,239
  82,423
  91,013
  100,005
  109,397
  119,191
  129,390
  140,002
  151,036
  162,505
  174,423
  186,808
  199,680
  213,061
  226,977
  241,454
  256,521
  272,211
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
  8,753
  10,761
  13,536
  16,757
  20,441
  24,595
  29,225
  34,328
  39,900
  45,931
  52,414
  59,114
  66,467
  74,239
  82,423
  91,013
  100,005
  109,397
  119,191
  129,390
  140,002
  151,036
  162,505
  174,423
  186,808
  199,680
  213,061
  226,977
  241,454
  256,521
  272,211
Operating income, $m
  1,454
  2,376
  3,060
  3,854
  4,762
  5,786
  6,927
  8,185
  9,558
  11,045
  12,643
  14,571
  16,384
  18,299
  20,317
  22,434
  24,651
  26,966
  29,380
  31,894
  34,510
  37,230
  40,056
  42,994
  46,047
  49,220
  52,518
  55,948
  59,517
  63,231
  67,098
EBITDA, $m
  2,658
  3,139
  3,965
  4,925
  6,022
  7,260
  8,639
  10,158
  11,818
  13,615
  15,545
  17,607
  19,797
  22,112
  24,550
  27,108
  29,786
  32,584
  35,501
  38,539
  41,700
  44,986
  48,402
  51,952
  55,641
  59,474
  63,460
  67,605
  71,917
  76,405
  81,078
Interest expense (income), $m
  161
  175
  290
  427
  586
  768
  973
  1,202
  1,454
  1,729
  2,027
  2,347
  2,689
  3,052
  3,436
  3,840
  4,264
  4,708
  5,172
  5,655
  6,159
  6,683
  7,228
  7,794
  8,383
  8,994
  9,630
  10,291
  10,978
  11,693
  12,437
Earnings before tax, $m
  2,099
  2,201
  2,769
  3,427
  4,175
  5,018
  5,954
  6,983
  8,104
  9,316
  10,616
  12,224
  13,695
  15,248
  16,881
  18,594
  20,387
  22,258
  24,208
  26,239
  28,351
  30,546
  32,829
  35,200
  37,664
  40,226
  42,888
  45,658
  48,539
  51,538
  54,662
Tax expense, $m
  421
  594
  748
  925
  1,127
  1,355
  1,608
  1,885
  2,188
  2,515
  2,866
  3,301
  3,698
  4,117
  4,558
  5,020
  5,504
  6,010
  6,536
  7,084
  7,655
  8,248
  8,864
  9,504
  10,169
  10,861
  11,580
  12,328
  13,106
  13,915
  14,759
Net income, $m
  1,602
  1,607
  2,022
  2,501
  3,048
  3,663
  4,346
  5,098
  5,916
  6,801
  7,750
  8,924
  9,997
  11,131
  12,323
  13,574
  14,882
  16,248
  17,672
  19,154
  20,696
  22,299
  23,965
  25,696
  27,495
  29,365
  31,308
  33,330
  35,433
  37,623
  39,903

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12,998
  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
  26,330
  17,149
  21,665
  26,907
  32,901
  39,662
  47,196
  55,500
  64,566
  74,382
  84,931
  96,195
  108,160
  120,807
  134,125
  148,104
  162,736
  178,019
  193,956
  210,554
  227,822
  245,778
  264,440
  283,834
  303,988
  324,934
  346,709
  369,354
  392,912
  417,431
  442,962
Adjusted assets (=assets-cash), $m
  13,332
  17,149
  21,665
  26,907
  32,901
  39,662
  47,196
  55,500
  64,566
  74,382
  84,931
  96,195
  108,160
  120,807
  134,125
  148,104
  162,736
  178,019
  193,956
  210,554
  227,822
  245,778
  264,440
  283,834
  303,988
  324,934
  346,709
  369,354
  392,912
  417,431
  442,962
Revenue / Adjusted assets
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
  0.766
Average production assets, $m
  2,107
  2,706
  3,419
  4,246
  5,192
  6,259
  7,447
  8,758
  10,188
  11,737
  13,402
  15,179
  17,067
  19,063
  21,164
  23,370
  25,679
  28,091
  30,606
  33,225
  35,949
  38,783
  41,728
  44,788
  47,968
  51,273
  54,709
  58,283
  62,000
  65,869
  69,898
Working capital, $m
  7,762
  -4,913
  -6,207
  -7,708
  -9,426
  -11,363
  -13,521
  -15,900
  -18,497
  -21,309
  -24,331
  -27,558
  -30,986
  -34,609
  -38,425
  -42,429
  -46,621
  -51,000
  -55,565
  -60,320
  -65,267
  -70,411
  -75,758
  -81,314
  -87,088
  -93,088
  -99,327
  -105,814
  -112,563
  -119,587
  -126,902
Total debt, $m
  6,404
  8,291
  12,206
  16,751
  21,948
  27,810
  34,342
  41,542
  49,402
  57,912
  67,058
  76,824
  87,197
  98,163
  109,710
  121,829
  134,515
  147,766
  161,583
  175,973
  190,945
  206,512
  222,693
  239,507
  256,981
  275,141
  294,020
  313,653
  334,078
  355,336
  377,471
Total liabilities, $m
  12,981
  14,868
  18,783
  23,328
  28,525
  34,387
  40,919
  48,119
  55,979
  64,489
  73,635
  83,401
  93,774
  104,740
  116,287
  128,406
  141,092
  154,343
  168,160
  182,550
  197,522
  213,089
  229,270
  246,084
  263,558
  281,718
  300,597
  320,230
  340,655
  361,913
  384,048
Total equity, $m
  13,349
  2,281
  2,881
  3,579
  4,376
  5,275
  6,277
  7,382
  8,587
  9,893
  11,296
  12,794
  14,385
  16,067
  17,839
  19,698
  21,644
  23,677
  25,796
  28,004
  30,300
  32,688
  35,171
  37,750
  40,430
  43,216
  46,112
  49,124
  52,257
  55,518
  58,914
Total liabilities and equity, $m
  26,330
  17,149
  21,664
  26,907
  32,901
  39,662
  47,196
  55,501
  64,566
  74,382
  84,931
  96,195
  108,159
  120,807
  134,126
  148,104
  162,736
  178,020
  193,956
  210,554
  227,822
  245,777
  264,441
  283,834
  303,988
  324,934
  346,709
  369,354
  392,912
  417,431
  442,962
Debt-to-equity ratio
  0.480
  3.640
  4.240
  4.680
  5.020
  5.270
  5.470
  5.630
  5.750
  5.850
  5.940
  6.000
  6.060
  6.110
  6.150
  6.180
  6.210
  6.240
  6.260
  6.280
  6.300
  6.320
  6.330
  6.340
  6.360
  6.370
  6.380
  6.380
  6.390
  6.400
  6.410
Adjusted equity ratio
  0.095
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133
  0.133

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,602
  1,607
  2,022
  2,501
  3,048
  3,663
  4,346
  5,098
  5,916
  6,801
  7,750
  8,924
  9,997
  11,131
  12,323
  13,574
  14,882
  16,248
  17,672
  19,154
  20,696
  22,299
  23,965
  25,696
  27,495
  29,365
  31,308
  33,330
  35,433
  37,623
  39,903
Depreciation, amort., depletion, $m
  1,204
  763
  906
  1,071
  1,260
  1,474
  1,711
  1,974
  2,260
  2,569
  2,902
  3,036
  3,413
  3,813
  4,233
  4,674
  5,136
  5,618
  6,121
  6,645
  7,190
  7,757
  8,346
  8,958
  9,594
  10,255
  10,942
  11,657
  12,400
  13,174
  13,980
Funds from operations, $m
  4,036
  2,370
  2,927
  3,573
  4,308
  5,137
  6,058
  7,071
  8,176
  9,370
  10,652
  11,960
  13,411
  14,943
  16,556
  18,248
  20,018
  21,866
  23,793
  25,799
  27,886
  30,055
  32,310
  34,654
  37,089
  39,619
  42,250
  44,987
  47,833
  50,797
  53,882
Change in working capital, $m
  816
  -1,096
  -1,294
  -1,502
  -1,717
  -1,937
  -2,158
  -2,379
  -2,597
  -2,812
  -3,022
  -3,227
  -3,428
  -3,623
  -3,815
  -4,005
  -4,192
  -4,379
  -4,566
  -4,755
  -4,947
  -5,144
  -5,347
  -5,556
  -5,774
  -6,001
  -6,238
  -6,487
  -6,749
  -7,024
  -7,314
Cash from operations, $m
  3,220
  3,466
  4,221
  5,074
  6,026
  7,074
  8,216
  9,450
  10,773
  12,182
  13,674
  15,187
  16,838
  18,567
  20,372
  22,252
  24,210
  26,245
  28,359
  30,554
  32,833
  35,199
  37,657
  40,210
  42,862
  45,620
  48,489
  51,474
  54,582
  57,821
  61,197
Maintenance CAPEX, $m
  0
  -421
  -541
  -684
  -849
  -1,038
  -1,252
  -1,489
  -1,752
  -2,038
  -2,347
  -2,680
  -3,036
  -3,413
  -3,813
  -4,233
  -4,674
  -5,136
  -5,618
  -6,121
  -6,645
  -7,190
  -7,757
  -8,346
  -8,958
  -9,594
  -10,255
  -10,942
  -11,657
  -12,400
  -13,174
New CAPEX, $m
  -1,520
  -600
  -713
  -827
  -946
  -1,067
  -1,189
  -1,310
  -1,431
  -1,549
  -1,665
  -1,778
  -1,888
  -1,996
  -2,102
  -2,206
  -2,309
  -2,412
  -2,515
  -2,619
  -2,725
  -2,833
  -2,945
  -3,060
  -3,180
  -3,305
  -3,436
  -3,573
  -3,717
  -3,869
  -4,029
Cash from investing activities, $m
  -5,195
  -1,021
  -1,254
  -1,511
  -1,795
  -2,105
  -2,441
  -2,799
  -3,183
  -3,587
  -4,012
  -4,458
  -4,924
  -5,409
  -5,915
  -6,439
  -6,983
  -7,548
  -8,133
  -8,740
  -9,370
  -10,023
  -10,702
  -11,406
  -12,138
  -12,899
  -13,691
  -14,515
  -15,374
  -16,269
  -17,203
Free cash flow, $m
  -1,975
  2,445
  2,967
  3,563
  4,231
  4,968
  5,775
  6,650
  7,591
  8,596
  9,662
  10,729
  11,914
  13,157
  14,457
  15,814
  17,227
  18,697
  20,226
  21,814
  23,463
  25,176
  26,955
  28,804
  30,724
  32,721
  34,798
  36,959
  39,209
  41,552
  43,994
Issuance/(repayment) of debt, $m
  991
  3,304
  3,915
  4,545
  5,197
  5,862
  6,532
  7,200
  7,860
  8,510
  9,146
  9,767
  10,373
  10,966
  11,547
  12,119
  12,686
  13,251
  13,818
  14,390
  14,972
  15,567
  16,180
  16,814
  17,473
  18,160
  18,879
  19,633
  20,425
  21,258
  22,136
Issuance/(repurchase) of shares, $m
  121
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,090
  3,304
  3,915
  4,545
  5,197
  5,862
  6,532
  7,200
  7,860
  8,510
  9,146
  9,767
  10,373
  10,966
  11,547
  12,119
  12,686
  13,251
  13,818
  14,390
  14,972
  15,567
  16,180
  16,814
  17,473
  18,160
  18,879
  19,633
  20,425
  21,258
  22,136
Total cash flow (excl. dividends), $m
  136
  5,749
  6,882
  8,108
  9,428
  10,830
  12,307
  13,850
  15,451
  17,106
  18,808
  20,496
  22,287
  24,123
  26,004
  27,933
  29,913
  31,948
  34,043
  36,204
  38,435
  40,744
  43,136
  45,618
  48,198
  50,882
  53,677
  56,592
  59,633
  62,810
  66,130
Retained Cash Flow (-), $m
  -1,738
  -513
  -601
  -697
  -797
  -899
  -1,002
  -1,104
  -1,206
  -1,305
  -1,403
  -1,498
  -1,591
  -1,682
  -1,771
  -1,859
  -1,946
  -2,033
  -2,120
  -2,207
  -2,297
  -2,388
  -2,482
  -2,579
  -2,680
  -2,786
  -2,896
  -3,012
  -3,133
  -3,261
  -3,396
Prev. year cash balance distribution, $m
 
  11,581
  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
 
  16,817
  6,282
  7,411
  8,630
  9,931
  11,305
  12,746
  14,246
  15,800
  17,405
  18,997
  20,696
  22,441
  24,233
  26,074
  27,967
  29,915
  31,924
  33,996
  36,138
  38,356
  40,654
  43,039
  45,517
  48,096
  50,781
  53,580
  56,500
  59,549
  62,734
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
 
  16,124
  5,751
  6,450
  7,106
  7,698
  8,205
  8,611
  8,904
  9,076
  9,125
  9,022
  8,832
  8,532
  8,135
  7,655
  7,107
  6,509
  5,879
  5,234
  4,592
  3,967
  3,373
  2,821
  2,318
  1,871
  1,482
  1,150
  874
  650
  472
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

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 5.5
Price to Sales 0.9
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 2.8
Price to Free Cash Flow 5.2
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 $10207 million for the last fiscal year's total revenue generated by Baidu ADR. The default revenue input number comes from 2016 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 28.7% 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 82.4%.

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 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 3.5% 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 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 BIDU are equal to 20.6%.

Life of production assets of 3.6 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 -37.4%. 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 - $13349 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 347.551 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 $89.0 billion.

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Financial statements of BIDU
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