Intrinsic value of Baidu ADR - BIDU

Previous Close

$226.63

  Intrinsic Value

$807.58

stock screener

  Rating & Target

str. buy

+256%

Previous close

$226.63

 
Intrinsic value

$807.58

 
Up/down potential

+256%

 
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 0001), $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 62.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

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
  16,177
  20,073
  24,523
  29,540
  35,125
  41,279
  47,993
  55,259
  63,065
  71,398
  80,246
  89,597
  99,441
  109,772
  120,584
  131,877
  143,651
  155,913
  168,670
  181,934
  195,719
  210,045
  224,933
  240,406
  256,492
  273,220
  290,623
  308,737
  327,599
  347,251
Variable operating expenses, $m
  10,463
  12,905
  15,696
  18,840
  22,342
  26,200
  30,409
  34,965
  39,858
  45,082
  50,307
  56,170
  62,341
  68,818
  75,596
  82,676
  90,057
  97,744
  105,742
  114,057
  122,700
  131,681
  141,014
  150,714
  160,799
  171,286
  182,197
  193,552
  205,377
  217,697
Fixed operating expenses, $m
  2,177
  2,225
  2,274
  2,324
  2,375
  2,427
  2,480
  2,535
  2,591
  2,648
  2,706
  2,766
  2,826
  2,889
  2,952
  3,017
  3,084
  3,151
  3,221
  3,292
  3,364
  3,438
  3,514
  3,591
  3,670
  3,751
  3,833
  3,917
  4,004
  4,092
Total operating expenses, $m
  12,640
  15,130
  17,970
  21,164
  24,717
  28,627
  32,889
  37,500
  42,449
  47,730
  53,013
  58,936
  65,167
  71,707
  78,548
  85,693
  93,141
  100,895
  108,963
  117,349
  126,064
  135,119
  144,528
  154,305
  164,469
  175,037
  186,030
  197,469
  209,381
  221,789
Operating income, $m
  3,537
  4,943
  6,554
  8,375
  10,408
  12,652
  15,103
  17,760
  20,616
  23,668
  27,232
  30,661
  34,273
  38,065
  42,036
  46,184
  50,510
  55,017
  59,707
  64,585
  69,656
  74,927
  80,405
  86,101
  92,023
  98,183
  104,594
  111,267
  118,218
  125,462
EBITDA, $m
  4,354
  5,878
  7,626
  9,601
  11,805
  14,237
  16,894
  19,772
  22,868
  26,175
  29,688
  33,403
  37,317
  41,425
  45,726
  50,220
  54,907
  59,788
  64,869
  70,152
  75,645
  81,354
  87,289
  93,458
  99,872
  106,544
  113,487
  120,715
  128,244
  136,088
Interest expense (income), $m
  161
  356
  632
  951
  1,316
  1,727
  2,185
  2,689
  3,239
  3,835
  4,475
  5,158
  5,883
  6,649
  7,456
  8,303
  9,189
  10,115
  11,080
  12,085
  13,130
  14,217
  15,347
  16,521
  17,742
  19,010
  20,328
  21,699
  23,126
  24,610
  26,156
Earnings before tax, $m
  3,181
  4,311
  5,603
  7,060
  8,681
  10,467
  12,414
  14,520
  16,781
  19,193
  22,075
  24,779
  27,624
  30,609
  33,733
  36,995
  40,396
  43,937
  47,623
  51,455
  55,438
  59,579
  63,884
  68,359
  73,013
  77,855
  82,894
  88,141
  93,608
  99,305
Tax expense, $m
  859
  1,164
  1,513
  1,906
  2,344
  2,826
  3,352
  3,921
  4,531
  5,182
  5,960
  6,690
  7,459
  8,265
  9,108
  9,989
  10,907
  11,863
  12,858
  13,893
  14,968
  16,086
  17,249
  18,457
  19,714
  21,021
  22,381
  23,798
  25,274
  26,812
Net income, $m
  2,322
  3,147
  4,090
  5,154
  6,337
  7,641
  9,063
  10,600
  12,250
  14,011
  16,115
  18,088
  20,166
  22,345
  24,625
  27,006
  29,489
  32,074
  34,764
  37,562
  40,470
  43,493
  46,635
  49,902
  53,299
  56,834
  60,513
  64,343
  68,334
  72,493

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
  38,426
  47,679
  58,250
  70,165
  83,433
  98,049
  113,998
  131,257
  149,799
  169,592
  190,608
  212,819
  236,202
  260,741
  286,424
  313,247
  341,215
  370,339
  400,641
  432,146
  464,892
  498,920
  534,282
  571,035
  609,244
  648,978
  690,316
  733,342
  778,146
  824,823
Adjusted assets (=assets-cash), $m
  38,426
  47,679
  58,250
  70,165
  83,433
  98,049
  113,998
  131,257
  149,799
  169,592
  190,608
  212,819
  236,202
  260,741
  286,424
  313,247
  341,215
  370,339
  400,641
  432,146
  464,892
  498,920
  534,282
  571,035
  609,244
  648,978
  690,316
  733,342
  778,146
  824,823
Revenue / Adjusted assets
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
  0.421
Average production assets, $m
  4,109
  5,098
  6,229
  7,503
  8,922
  10,485
  12,190
  14,036
  16,019
  18,135
  20,382
  22,758
  25,258
  27,882
  30,628
  33,497
  36,487
  39,602
  42,842
  46,211
  49,713
  53,352
  57,133
  61,063
  65,149
  69,398
  73,818
  78,419
  83,210
  88,202
Working capital, $m
  -9,108
  -11,301
  -13,807
  -16,631
  -19,776
  -23,240
  -27,020
  -31,111
  -35,506
  -40,197
  -45,178
  -50,443
  -55,985
  -61,802
  -67,889
  -74,247
  -80,876
  -87,779
  -94,961
  -102,429
  -110,190
  -118,256
  -126,637
  -135,349
  -144,405
  -153,823
  -163,621
  -173,819
  -184,438
  -195,502
Total debt, $m
  11,697
  17,610
  24,365
  31,978
  40,457
  49,796
  59,988
  71,016
  82,864
  95,512
  108,941
  123,134
  138,076
  153,756
  170,168
  187,308
  205,179
  223,790
  243,152
  263,284
  284,209
  305,953
  328,549
  352,035
  376,450
  401,840
  428,255
  455,749
  484,378
  514,205
Total liabilities, $m
  24,554
  30,467
  37,222
  44,836
  53,314
  62,653
  72,845
  83,873
  95,721
  108,369
  121,798
  135,991
  150,933
  166,613
  183,025
  200,165
  218,036
  236,647
  256,009
  276,141
  297,066
  318,810
  341,406
  364,892
  389,307
  414,697
  441,112
  468,606
  497,235
  527,062
Total equity, $m
  13,872
  17,212
  21,028
  25,330
  30,119
  35,396
  41,153
  47,384
  54,077
  61,223
  68,809
  76,828
  85,269
  94,127
  103,399
  113,082
  123,179
  133,693
  144,631
  156,005
  167,826
  180,110
  192,876
  206,144
  219,937
  234,281
  249,204
  264,737
  280,911
  297,761
Total liabilities and equity, $m
  38,426
  47,679
  58,250
  70,166
  83,433
  98,049
  113,998
  131,257
  149,798
  169,592
  190,607
  212,819
  236,202
  260,740
  286,424
  313,247
  341,215
  370,340
  400,640
  432,146
  464,892
  498,920
  534,282
  571,036
  609,244
  648,978
  690,316
  733,343
  778,146
  824,823
Debt-to-equity ratio
  0.840
  1.020
  1.160
  1.260
  1.340
  1.410
  1.460
  1.500
  1.530
  1.560
  1.580
  1.600
  1.620
  1.630
  1.650
  1.660
  1.670
  1.670
  1.680
  1.690
  1.690
  1.700
  1.700
  1.710
  1.710
  1.720
  1.720
  1.720
  1.720
  1.730
Adjusted equity ratio
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361
  0.361

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,322
  3,147
  4,090
  5,154
  6,337
  7,641
  9,063
  10,600
  12,250
  14,011
  16,115
  18,088
  20,166
  22,345
  24,625
  27,006
  29,489
  32,074
  34,764
  37,562
  40,470
  43,493
  46,635
  49,902
  53,299
  56,834
  60,513
  64,343
  68,334
  72,493
Depreciation, amort., depletion, $m
  817
  936
  1,072
  1,226
  1,396
  1,585
  1,790
  2,013
  2,251
  2,506
  2,456
  2,742
  3,043
  3,359
  3,690
  4,036
  4,396
  4,771
  5,162
  5,568
  5,989
  6,428
  6,883
  7,357
  7,849
  8,361
  8,894
  9,448
  10,025
  10,627
Funds from operations, $m
  3,139
  4,083
  5,162
  6,379
  7,734
  9,226
  10,853
  12,613
  14,502
  16,518
  18,570
  20,830
  23,209
  25,704
  28,315
  31,042
  33,885
  36,846
  39,926
  43,129
  46,459
  49,921
  53,519
  57,259
  61,149
  65,195
  69,407
  73,791
  78,359
  83,120
Change in working capital, $m
  -1,891
  -2,193
  -2,506
  -2,824
  -3,145
  -3,464
  -3,780
  -4,091
  -4,395
  -4,691
  -4,981
  -5,265
  -5,542
  -5,816
  -6,087
  -6,358
  -6,629
  -6,903
  -7,182
  -7,468
  -7,761
  -8,066
  -8,382
  -8,711
  -9,056
  -9,418
  -9,798
  -10,198
  -10,619
  -11,064
Cash from operations, $m
  5,030
  6,276
  7,668
  9,203
  10,879
  12,690
  14,633
  16,703
  18,897
  21,209
  23,551
  26,095
  28,751
  31,520
  34,403
  37,400
  40,514
  43,749
  47,108
  50,597
  54,221
  57,986
  61,900
  65,970
  70,205
  74,613
  79,205
  83,989
  88,979
  94,183
Maintenance CAPEX, $m
  -392
  -495
  -614
  -750
  -904
  -1,075
  -1,263
  -1,469
  -1,691
  -1,930
  -2,185
  -2,456
  -2,742
  -3,043
  -3,359
  -3,690
  -4,036
  -4,396
  -4,771
  -5,162
  -5,568
  -5,989
  -6,428
  -6,883
  -7,357
  -7,849
  -8,361
  -8,894
  -9,448
  -10,025
New CAPEX, $m
  -858
  -989
  -1,130
  -1,274
  -1,419
  -1,563
  -1,706
  -1,846
  -1,983
  -2,117
  -2,247
  -2,375
  -2,500
  -2,624
  -2,746
  -2,868
  -2,991
  -3,114
  -3,240
  -3,369
  -3,502
  -3,639
  -3,781
  -3,930
  -4,086
  -4,249
  -4,420
  -4,601
  -4,791
  -4,991
Cash from investing activities, $m
  -1,250
  -1,484
  -1,744
  -2,024
  -2,323
  -2,638
  -2,969
  -3,315
  -3,674
  -4,047
  -4,432
  -4,831
  -5,242
  -5,667
  -6,105
  -6,558
  -7,027
  -7,510
  -8,011
  -8,531
  -9,070
  -9,628
  -10,209
  -10,813
  -11,443
  -12,098
  -12,781
  -13,495
  -14,239
  -15,016
Free cash flow, $m
  3,781
  4,791
  5,923
  7,179
  8,556
  10,052
  11,664
  13,389
  15,223
  17,163
  19,119
  21,264
  23,509
  25,853
  28,297
  30,841
  33,488
  36,238
  39,097
  42,066
  45,152
  48,358
  51,691
  55,157
  58,762
  62,515
  66,423
  70,495
  74,739
  79,166
Issuance/(repayment) of debt, $m
  5,112
  5,913
  6,755
  7,614
  8,478
  9,340
  10,192
  11,029
  11,848
  12,648
  13,429
  14,193
  14,942
  15,680
  16,411
  17,140
  17,872
  18,611
  19,362
  20,132
  20,924
  21,744
  22,596
  23,485
  24,415
  25,390
  26,415
  27,494
  28,629
  29,827
Issuance/(repurchase) of shares, $m
  553
  193
  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  
  5,665
  6,106
  6,755
  7,614
  8,478
  9,340
  10,192
  11,029
  11,848
  12,648
  13,429
  14,193
  14,942
  15,680
  16,411
  17,140
  17,872
  18,611
  19,362
  20,132
  20,924
  21,744
  22,596
  23,485
  24,415
  25,390
  26,415
  27,494
  28,629
  29,827
Total cash flow (excl. dividends), $m
  9,446
  10,897
  12,678
  14,792
  17,034
  19,392
  21,856
  24,418
  27,071
  29,811
  32,548
  35,457
  38,451
  41,533
  44,708
  47,981
  51,359
  54,849
  58,459
  62,198
  66,076
  70,102
  74,287
  78,642
  83,177
  87,905
  92,838
  97,988
  103,369
  108,993
Retained Cash Flow (-), $m
  -2,876
  -3,340
  -3,816
  -4,301
  -4,790
  -5,276
  -5,758
  -6,231
  -6,693
  -7,145
  -7,587
  -8,018
  -8,441
  -8,858
  -9,271
  -9,683
  -10,096
  -10,514
  -10,939
  -11,374
  -11,821
  -12,284
  -12,766
  -13,268
  -13,793
  -14,344
  -14,923
  -15,532
  -16,174
  -16,851
Prev. year cash balance distribution, $m
  6,439
  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
  13,009
  7,557
  8,862
  10,491
  12,244
  14,115
  16,098
  18,187
  20,377
  22,665
  24,962
  27,439
  30,009
  32,675
  35,437
  38,298
  41,263
  44,335
  47,520
  50,825
  54,255
  57,818
  61,522
  65,374
  69,384
  73,561
  77,915
  82,456
  87,195
  92,143
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
  12,473
  6,918
  7,712
  8,638
  9,491
  10,244
  10,876
  11,367
  11,706
  11,883
  11,854
  11,709
  11,410
  10,970
  10,404
  9,732
  8,978
  8,165
  7,317
  6,458
  5,612
  4,797
  4,032
  3,330
  2,699
  2,146
  1,672
  1,276
  952
  694
Current shareholders' claim on cash, %
  98.6
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2
  98.2

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 4.9
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 4.6
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 $12818.7726723 million for the last fiscal year's total revenue generated by Baidu ADR. The default revenue input number comes from 0001 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 $2130 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 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 25.4%.

Life of production assets of 8.3 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 -56.3%. 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 - $17434.401451 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 276.15 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 $62.6 billion.

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