Intrinsic value of Bristol-Myers Squibb - BMY

Previous Close

$59.96

  Intrinsic Value

$54.20

stock screener

  Rating & Target

hold

-10%

Previous close

$59.96

 
Intrinsic value

$54.20

 
Up/down potential

-10%

 
Rating

hold

We calculate the intrinsic value of BMY 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 98.2

 

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, %
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  22,210
  23,700
  25,250
  26,862
  28,540
  30,287
  32,107
  34,004
  35,982
  38,046
  40,201
  42,451
  44,801
  47,257
  49,826
  52,512
  55,322
  58,264
  61,343
  64,568
  67,945
  71,484
  75,192
  79,078
  83,152
  87,423
  91,901
  96,598
  101,523
  106,690
Variable operating expenses, $m
  15,402
  16,381
  17,400
  18,459
  19,562
  20,710
  21,906
  23,153
  24,453
  25,809
  26,418
  27,896
  29,441
  31,055
  32,743
  34,508
  36,355
  38,288
  40,311
  42,430
  44,650
  46,975
  49,412
  51,965
  54,642
  57,449
  60,392
  63,478
  66,715
  70,111
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
  15,402
  16,381
  17,400
  18,459
  19,562
  20,710
  21,906
  23,153
  24,453
  25,809
  26,418
  27,896
  29,441
  31,055
  32,743
  34,508
  36,355
  38,288
  40,311
  42,430
  44,650
  46,975
  49,412
  51,965
  54,642
  57,449
  60,392
  63,478
  66,715
  70,111
Operating income, $m
  6,807
  7,318
  7,850
  8,402
  8,978
  9,577
  10,201
  10,851
  11,530
  12,237
  13,783
  14,554
  15,360
  16,203
  17,083
  18,004
  18,968
  19,976
  21,032
  22,137
  23,295
  24,509
  25,780
  27,112
  28,509
  29,973
  31,509
  33,119
  34,808
  36,580
EBITDA, $m
  9,021
  9,626
  10,255
  10,910
  11,592
  12,301
  13,041
  13,811
  14,615
  15,453
  16,328
  17,242
  18,196
  19,194
  20,237
  21,328
  22,470
  23,664
  24,915
  26,225
  27,596
  29,034
  30,540
  32,118
  33,773
  35,507
  37,326
  39,234
  41,235
  43,333
Interest expense (income), $m
  191
  430
  512
  596
  684
  775
  871
  970
  1,073
  1,180
  1,293
  1,410
  1,532
  1,659
  1,793
  1,932
  2,078
  2,230
  2,389
  2,556
  2,731
  2,913
  3,105
  3,306
  3,516
  3,736
  3,967
  4,209
  4,463
  4,730
  5,009
Earnings before tax, $m
  6,377
  6,807
  7,254
  7,718
  8,202
  8,706
  9,231
  9,778
  10,349
  10,945
  12,374
  13,023
  13,701
  14,410
  15,151
  15,927
  16,738
  17,587
  18,476
  19,407
  20,382
  21,404
  22,474
  23,596
  24,773
  26,006
  27,299
  28,656
  30,078
  31,571
Tax expense, $m
  1,722
  1,838
  1,958
  2,084
  2,215
  2,351
  2,492
  2,640
  2,794
  2,955
  3,341
  3,516
  3,699
  3,891
  4,091
  4,300
  4,519
  4,748
  4,988
  5,240
  5,503
  5,779
  6,068
  6,371
  6,689
  7,022
  7,371
  7,737
  8,121
  8,524
Net income, $m
  4,656
  4,969
  5,295
  5,634
  5,988
  6,356
  6,739
  7,138
  7,555
  7,990
  9,033
  9,507
  10,002
  10,519
  11,060
  11,626
  12,219
  12,838
  13,487
  14,167
  14,879
  15,625
  16,406
  17,225
  18,084
  18,985
  19,929
  20,919
  21,957
  23,047

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
  35,880
  38,287
  40,791
  43,395
  46,106
  48,929
  51,869
  54,934
  58,130
  61,464
  64,945
  68,579
  72,376
  76,345
  80,494
  84,833
  89,374
  94,125
  99,100
  104,310
  109,766
  115,482
  121,473
  127,751
  134,332
  141,232
  148,467
  156,054
  164,012
  172,359
Adjusted assets (=assets-cash), $m
  35,880
  38,287
  40,791
  43,395
  46,106
  48,929
  51,869
  54,934
  58,130
  61,464
  64,945
  68,579
  72,376
  76,345
  80,494
  84,833
  89,374
  94,125
  99,100
  104,310
  109,766
  115,482
  121,473
  127,751
  134,332
  141,232
  148,467
  156,054
  164,012
  172,359
Revenue / Adjusted assets
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
  0.619
Average production assets, $m
  14,059
  15,002
  15,983
  17,003
  18,066
  19,172
  20,324
  21,525
  22,777
  24,083
  25,447
  26,871
  28,359
  29,914
  31,540
  33,240
  35,019
  36,881
  38,830
  40,871
  43,009
  45,249
  47,596
  50,056
  52,635
  55,338
  58,173
  61,146
  64,264
  67,535
Working capital, $m
  -1,155
  -1,232
  -1,313
  -1,397
  -1,484
  -1,575
  -1,670
  -1,768
  -1,871
  -1,978
  -2,090
  -2,207
  -2,330
  -2,457
  -2,591
  -2,731
  -2,877
  -3,030
  -3,190
  -3,358
  -3,533
  -3,717
  -3,910
  -4,112
  -4,324
  -4,546
  -4,779
  -5,023
  -5,279
  -5,548
Total debt, $m
  9,474
  11,039
  12,666
  14,359
  16,121
  17,956
  19,867
  21,859
  23,937
  26,104
  28,366
  30,729
  33,197
  35,776
  38,473
  41,294
  44,245
  47,334
  50,567
  53,953
  57,500
  61,216
  65,109
  69,190
  73,468
  77,953
  82,655
  87,587
  92,760
  98,186
Total liabilities, $m
  23,322
  24,887
  26,514
  28,207
  29,969
  31,804
  33,715
  35,707
  37,785
  39,952
  42,214
  44,577
  47,045
  49,624
  52,321
  55,142
  58,093
  61,182
  64,415
  67,801
  71,348
  75,064
  78,957
  83,038
  87,316
  91,801
  96,503
  101,435
  106,608
  112,034
Total equity, $m
  12,558
  13,401
  14,277
  15,188
  16,137
  17,125
  18,154
  19,227
  20,346
  21,513
  22,731
  24,003
  25,332
  26,721
  28,173
  29,692
  31,281
  32,944
  34,685
  36,508
  38,418
  40,419
  42,515
  44,713
  47,016
  49,431
  51,963
  54,619
  57,404
  60,326
Total liabilities and equity, $m
  35,880
  38,288
  40,791
  43,395
  46,106
  48,929
  51,869
  54,934
  58,131
  61,465
  64,945
  68,580
  72,377
  76,345
  80,494
  84,834
  89,374
  94,126
  99,100
  104,309
  109,766
  115,483
  121,472
  127,751
  134,332
  141,232
  148,466
  156,054
  164,012
  172,360
Debt-to-equity ratio
  0.750
  0.820
  0.890
  0.950
  1.000
  1.050
  1.090
  1.140
  1.180
  1.210
  1.250
  1.280
  1.310
  1.340
  1.370
  1.390
  1.410
  1.440
  1.460
  1.480
  1.500
  1.510
  1.530
  1.550
  1.560
  1.580
  1.590
  1.600
  1.620
  1.630
Adjusted equity ratio
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350
  0.350

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,656
  4,969
  5,295
  5,634
  5,988
  6,356
  6,739
  7,138
  7,555
  7,990
  9,033
  9,507
  10,002
  10,519
  11,060
  11,626
  12,219
  12,838
  13,487
  14,167
  14,879
  15,625
  16,406
  17,225
  18,084
  18,985
  19,929
  20,919
  21,957
  23,047
Depreciation, amort., depletion, $m
  2,213
  2,307
  2,406
  2,508
  2,614
  2,724
  2,840
  2,960
  3,085
  3,216
  2,545
  2,687
  2,836
  2,991
  3,154
  3,324
  3,502
  3,688
  3,883
  4,087
  4,301
  4,525
  4,760
  5,006
  5,263
  5,534
  5,817
  6,115
  6,426
  6,754
Funds from operations, $m
  6,869
  7,276
  7,701
  8,142
  8,602
  9,080
  9,578
  10,098
  10,640
  11,205
  11,577
  12,194
  12,838
  13,511
  14,214
  14,950
  15,720
  16,527
  17,370
  18,254
  19,180
  20,150
  21,166
  22,231
  23,348
  24,518
  25,746
  27,033
  28,384
  29,800
Change in working capital, $m
  -75
  -77
  -81
  -84
  -87
  -91
  -95
  -99
  -103
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -146
  -153
  -160
  -168
  -176
  -184
  -193
  -202
  -212
  -222
  -233
  -244
  -256
  -269
Cash from operations, $m
  6,943
  7,354
  7,781
  8,226
  8,689
  9,171
  9,673
  10,197
  10,743
  11,313
  11,689
  12,311
  12,960
  13,638
  14,348
  15,090
  15,867
  16,679
  17,531
  18,422
  19,355
  20,334
  21,359
  22,433
  23,560
  24,740
  25,979
  27,278
  28,640
  30,069
Maintenance CAPEX, $m
  -1,316
  -1,406
  -1,500
  -1,598
  -1,700
  -1,807
  -1,917
  -2,032
  -2,152
  -2,278
  -2,408
  -2,545
  -2,687
  -2,836
  -2,991
  -3,154
  -3,324
  -3,502
  -3,688
  -3,883
  -4,087
  -4,301
  -4,525
  -4,760
  -5,006
  -5,263
  -5,534
  -5,817
  -6,115
  -6,426
New CAPEX, $m
  -902
  -943
  -981
  -1,021
  -1,062
  -1,106
  -1,152
  -1,201
  -1,252
  -1,307
  -1,364
  -1,424
  -1,488
  -1,555
  -1,626
  -1,700
  -1,779
  -1,862
  -1,949
  -2,041
  -2,138
  -2,240
  -2,347
  -2,460
  -2,579
  -2,704
  -2,835
  -2,973
  -3,118
  -3,271
Cash from investing activities, $m
  -2,218
  -2,349
  -2,481
  -2,619
  -2,762
  -2,913
  -3,069
  -3,233
  -3,404
  -3,585
  -3,772
  -3,969
  -4,175
  -4,391
  -4,617
  -4,854
  -5,103
  -5,364
  -5,637
  -5,924
  -6,225
  -6,541
  -6,872
  -7,220
  -7,585
  -7,967
  -8,369
  -8,790
  -9,233
  -9,697
Free cash flow, $m
  4,726
  5,005
  5,300
  5,607
  5,926
  6,258
  6,604
  6,963
  7,338
  7,728
  7,917
  8,342
  8,785
  9,248
  9,731
  10,236
  10,764
  11,316
  11,893
  12,498
  13,130
  13,793
  14,487
  15,214
  15,975
  16,773
  17,610
  18,487
  19,407
  20,372
Issuance/(repayment) of debt, $m
  1,512
  1,565
  1,627
  1,693
  1,762
  1,835
  1,911
  1,992
  2,077
  2,167
  2,262
  2,362
  2,468
  2,579
  2,697
  2,821
  2,951
  3,089
  3,234
  3,386
  3,547
  3,716
  3,894
  4,081
  4,278
  4,485
  4,703
  4,932
  5,173
  5,426
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  1,512
  1,565
  1,627
  1,693
  1,762
  1,835
  1,911
  1,992
  2,077
  2,167
  2,262
  2,362
  2,468
  2,579
  2,697
  2,821
  2,951
  3,089
  3,234
  3,386
  3,547
  3,716
  3,894
  4,081
  4,278
  4,485
  4,703
  4,932
  5,173
  5,426
Total cash flow (excl. dividends), $m
  6,238
  6,570
  6,927
  7,300
  7,688
  8,093
  8,515
  8,956
  9,415
  9,896
  10,180
  10,704
  11,253
  11,827
  12,428
  13,056
  13,715
  14,404
  15,127
  15,884
  16,677
  17,509
  18,380
  19,294
  20,253
  21,258
  22,313
  23,419
  24,580
  25,797
Retained Cash Flow (-), $m
  -817
  -843
  -876
  -912
  -949
  -988
  -1,029
  -1,073
  -1,119
  -1,167
  -1,218
  -1,272
  -1,329
  -1,389
  -1,452
  -1,519
  -1,589
  -1,663
  -1,741
  -1,823
  -1,910
  -2,001
  -2,097
  -2,197
  -2,303
  -2,415
  -2,532
  -2,656
  -2,785
  -2,922
Prev. year cash balance distribution, $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 flow adjustment, $m
  208
  222
  237
  252
  269
  285
  303
  321
  340
  360
  380
  402
  425
  448
  473
  498
  525
  553
  583
  613
  646
  679
  715
  752
  791
  832
  874
  919
  966
  1,015
Cash available for distribution, $m
  5,421
  5,727
  6,051
  6,389
  6,740
  7,105
  7,486
  7,883
  8,297
  8,729
  8,961
  9,432
  9,924
  10,438
  10,975
  11,538
  12,126
  12,741
  13,386
  14,060
  14,767
  15,508
  16,284
  17,097
  17,950
  18,843
  19,781
  20,764
  21,794
  22,876
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
  5,197
  5,243
  5,266
  5,260
  5,224
  5,156
  5,057
  4,927
  4,766
  4,576
  4,256
  4,025
  3,773
  3,504
  3,222
  2,932
  2,638
  2,346
  2,061
  1,787
  1,527
  1,287
  1,067
  871
  698
  550
  425
  321
  238
  172
Current shareholders' claim on cash, %
  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

Bristol-Myers Squibb Company is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products. The Company's pharmaceutical products include chemically synthesized drugs, or small molecules, and products produced from biological processes called biologics. Small molecule drugs are administered orally in the form of a pill or tablet. Biologics are administered to patients through injections or by infusion. The Company's products include Empliciti, Opdivo, Sprycel, Yervoy, Eliquis, Orencia, Baraclude, Hepatitis C Franchise, Reyataz Franchise and Sustiva Franchise. It offers products for a range of therapeutic classes, which include virology, including human immunodeficiency virus (HIV) infection; oncology; immunoscience, and cardiovascular. Its products are sold to wholesalers, retail pharmacies, hospitals, government entities and the medical profession across the world.

FINANCIAL RATIOS  of  Bristol-Myers Squibb (BMY)

Valuation Ratios
P/E Ratio 22.4
Price to Sales 5.1
Price to Book 6.2
Price to Tangible Book
Price to Cash Flow 35
Price to Free Cash Flow 61
Growth Rates
Sales Growth Rate 17.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 48.2%
Cap. Spend. - 3 Yr. Gr. Rate 17.7%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 35.3%
Total Debt to Equity 41.5%
Interest Coverage 32
Management Effectiveness
Return On Assets 14.1%
Ret/ On Assets - 3 Yr. Avg. 8.5%
Return On Total Capital 20.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 29.3%
Return On Equity - 3 Yr. Avg. 17.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 74.6%
Gross Margin - 3 Yr. Avg. 75.9%
EBITDA Margin 33.4%
EBITDA Margin - 3 Yr. Avg. 23%
Operating Margin 30.6%
Oper. Margin - 3 Yr. Avg. 18.1%
Pre-Tax Margin 30.4%
Pre-Tax Margin - 3 Yr. Avg. 19.3%
Net Profit Margin 22.9%
Net Profit Margin - 3 Yr. Avg. 15%
Effective Tax Rate 23.8%
Eff/ Tax Rate - 3 Yr. Avg. 20%
Payout Ratio 57.1%

BMY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BMY stock intrinsic value calculation we used $20776 million for the last fiscal year's total revenue generated by Bristol-Myers Squibb. The default revenue input number comes from 2017 income statement of Bristol-Myers Squibb. 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 BMY stock valuation model: a) initial revenue growth rate of 6.9% 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 BMY is calculated based on our internal credit rating of Bristol-Myers Squibb, 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 Bristol-Myers Squibb.
    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 BMY stock the variable cost ratio is equal to 69.6%.

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 BMY 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 Bristol-Myers Squibb.

Corporate tax rate of 27% is the nominal tax rate for Bristol-Myers Squibb. 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 BMY stock is equal to 1%.

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 BMY are equal to 63.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Bristol-Myers Squibb 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 BMY is equal to -5.2%. 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 - $11741 million for Bristol-Myers Squibb - 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 1637 million for Bristol-Myers Squibb 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 Bristol-Myers Squibb at the current share price and the inputted number of shares is $98.2 billion.

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