Intrinsic value of BT Group ADR - BT

Previous Close

$18.12

  Intrinsic Value

$27.33

stock screener

  Rating & Target

str. buy

+51%

  Value-price divergence*

-60%

Previous close

$18.12

 
Intrinsic value

$27.33

 
Up/down potential

+51%

 
Rating

str. buy

 
Value-price divergence*

-60%

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

We calculate the intrinsic value of BT 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 35.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  27.56
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  29,276
  29,862
  30,548
  31,333
  32,215
  33,191
  34,263
  35,430
  36,693
  38,054
  39,514
  41,077
  42,744
  44,519
  46,405
  48,407
  50,528
  52,774
  55,149
  57,658
  60,307
  63,102
  66,050
  69,158
  72,432
  75,880
  79,511
  83,332
  87,353
  91,584
  96,033
Variable operating expenses, $m
 
  24,497
  25,038
  25,656
  26,350
  27,120
  27,964
  28,883
  29,878
  30,949
  32,100
  32,354
  33,667
  35,065
  36,551
  38,127
  39,798
  41,567
  43,437
  45,413
  47,500
  49,702
  52,024
  54,471
  57,050
  59,766
  62,626
  65,635
  68,803
  72,135
  75,640
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
  25,682
  24,497
  25,038
  25,656
  26,350
  27,120
  27,964
  28,883
  29,878
  30,949
  32,100
  32,354
  33,667
  35,065
  36,551
  38,127
  39,798
  41,567
  43,437
  45,413
  47,500
  49,702
  52,024
  54,471
  57,050
  59,766
  62,626
  65,635
  68,803
  72,135
  75,640
Operating income, $m
  3,595
  5,365
  5,511
  5,677
  5,865
  6,072
  6,299
  6,547
  6,816
  7,104
  7,415
  8,723
  9,077
  9,454
  9,855
  10,280
  10,730
  11,207
  11,711
  12,244
  12,807
  13,401
  14,027
  14,686
  15,382
  16,114
  16,885
  17,697
  18,550
  19,449
  20,394
EBITDA, $m
  7,937
  9,653
  9,875
  10,129
  10,414
  10,730
  11,076
  11,453
  11,862
  12,302
  12,774
  13,279
  13,818
  14,392
  15,001
  15,649
  16,334
  17,060
  17,828
  18,639
  19,495
  20,399
  21,352
  22,357
  23,415
  24,530
  25,703
  26,939
  28,239
  29,606
  31,045
Interest expense (income), $m
  765
  596
  632
  674
  722
  776
  836
  901
  972
  1,050
  1,133
  1,222
  1,317
  1,419
  1,528
  1,643
  1,765
  1,895
  2,032
  2,177
  2,331
  2,492
  2,663
  2,843
  3,033
  3,233
  3,444
  3,666
  3,899
  4,145
  4,403
Earnings before tax, $m
  2,862
  4,768
  4,878
  5,003
  5,142
  5,296
  5,464
  5,646
  5,843
  6,055
  6,282
  7,501
  7,760
  8,035
  8,327
  8,637
  8,965
  9,312
  9,679
  10,067
  10,476
  10,908
  11,363
  11,843
  12,349
  12,881
  13,441
  14,031
  14,651
  15,304
  15,990
Tax expense, $m
  542
  1,287
  1,317
  1,351
  1,388
  1,430
  1,475
  1,524
  1,578
  1,635
  1,696
  2,025
  2,095
  2,169
  2,248
  2,332
  2,421
  2,514
  2,613
  2,718
  2,829
  2,945
  3,068
  3,198
  3,334
  3,478
  3,629
  3,788
  3,956
  4,132
  4,317
Net income, $m
  2,320
  3,481
  3,561
  3,652
  3,754
  3,866
  3,989
  4,122
  4,266
  4,420
  4,586
  5,476
  5,665
  5,865
  6,079
  6,305
  6,544
  6,798
  7,066
  7,349
  7,648
  7,963
  8,295
  8,645
  9,014
  9,403
  9,812
  10,242
  10,695
  11,172
  11,673

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,490
  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
  51,512
  50,019
  51,170
  52,485
  53,961
  55,597
  57,392
  59,347
  61,462
  63,742
  66,188
  68,805
  71,598
  74,571
  77,731
  81,084
  84,637
  88,399
  92,376
  96,579
  101,017
  105,699
  110,637
  115,842
  121,326
  127,102
  133,184
  139,585
  146,320
  153,407
  160,860
Adjusted assets (=assets-cash), $m
  49,022
  50,019
  51,170
  52,485
  53,961
  55,597
  57,392
  59,347
  61,462
  63,742
  66,188
  68,805
  71,598
  74,571
  77,731
  81,084
  84,637
  88,399
  92,376
  96,579
  101,017
  105,699
  110,637
  115,842
  121,326
  127,102
  133,184
  139,585
  146,320
  153,407
  160,860
Revenue / Adjusted assets
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
  0.597
Average production assets, $m
  28,574
  29,145
  29,815
  30,581
  31,442
  32,395
  33,441
  34,580
  35,812
  37,141
  38,566
  40,091
  41,718
  43,450
  45,292
  47,245
  49,316
  51,507
  53,825
  56,274
  58,860
  61,588
  64,465
  67,498
  70,693
  74,059
  77,602
  81,332
  85,257
  89,386
  93,729
Working capital, $m
  -4,924
  -4,300
  -4,399
  -4,512
  -4,639
  -4,780
  -4,934
  -5,102
  -5,284
  -5,480
  -5,690
  -5,915
  -6,155
  -6,411
  -6,682
  -6,971
  -7,276
  -7,599
  -7,941
  -8,303
  -8,684
  -9,087
  -9,511
  -9,959
  -10,430
  -10,927
  -11,450
  -12,000
  -12,579
  -13,188
  -13,829
Total debt, $m
  15,455
  13,741
  14,654
  15,696
  16,867
  18,165
  19,588
  21,138
  22,816
  24,623
  26,563
  28,639
  30,853
  33,211
  35,717
  38,376
  41,193
  44,176
  47,330
  50,663
  54,182
  57,895
  61,811
  65,939
  70,288
  74,868
  79,691
  84,767
  90,108
  95,727
  101,638
Total liabilities, $m
  41,379
  39,665
  40,578
  41,620
  42,791
  44,089
  45,512
  47,062
  48,740
  50,547
  52,487
  54,563
  56,777
  59,135
  61,641
  64,300
  67,117
  70,100
  73,254
  76,587
  80,106
  83,819
  87,735
  91,863
  96,212
  100,792
  105,615
  110,691
  116,032
  121,651
  127,562
Total equity, $m
  10,133
  10,354
  10,592
  10,864
  11,170
  11,509
  11,880
  12,285
  12,723
  13,195
  13,701
  14,243
  14,821
  15,436
  16,090
  16,784
  17,520
  18,299
  19,122
  19,992
  20,910
  21,880
  22,902
  23,979
  25,115
  26,310
  27,569
  28,894
  30,288
  31,755
  33,298
Total liabilities and equity, $m
  51,512
  50,019
  51,170
  52,484
  53,961
  55,598
  57,392
  59,347
  61,463
  63,742
  66,188
  68,806
  71,598
  74,571
  77,731
  81,084
  84,637
  88,399
  92,376
  96,579
  101,016
  105,699
  110,637
  115,842
  121,327
  127,102
  133,184
  139,585
  146,320
  153,406
  160,860
Debt-to-equity ratio
  1.525
  1.330
  1.380
  1.440
  1.510
  1.580
  1.650
  1.720
  1.790
  1.870
  1.940
  2.010
  2.080
  2.150
  2.220
  2.290
  2.350
  2.410
  2.480
  2.530
  2.590
  2.650
  2.700
  2.750
  2.800
  2.850
  2.890
  2.930
  2.980
  3.010
  3.050
Adjusted equity ratio
  0.156
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,320
  3,481
  3,561
  3,652
  3,754
  3,866
  3,989
  4,122
  4,266
  4,420
  4,586
  5,476
  5,665
  5,865
  6,079
  6,305
  6,544
  6,798
  7,066
  7,349
  7,648
  7,963
  8,295
  8,645
  9,014
  9,403
  9,812
  10,242
  10,695
  11,172
  11,673
Depreciation, amort., depletion, $m
  4,342
  4,289
  4,365
  4,452
  4,550
  4,658
  4,777
  4,906
  5,046
  5,197
  5,359
  4,556
  4,741
  4,938
  5,147
  5,369
  5,604
  5,853
  6,116
  6,395
  6,689
  6,999
  7,326
  7,670
  8,033
  8,416
  8,818
  9,242
  9,688
  10,157
  10,651
Funds from operations, $m
  6,814
  7,770
  7,926
  8,104
  8,304
  8,524
  8,765
  9,028
  9,312
  9,617
  9,945
  10,032
  10,405
  10,803
  11,225
  11,674
  12,149
  12,651
  13,182
  13,744
  14,336
  14,962
  15,621
  16,316
  17,048
  17,819
  18,630
  19,485
  20,384
  21,329
  22,324
Change in working capital, $m
  -692
  -84
  -99
  -113
  -127
  -141
  -154
  -168
  -182
  -196
  -210
  -225
  -240
  -256
  -272
  -288
  -305
  -323
  -342
  -361
  -381
  -403
  -425
  -447
  -471
  -497
  -523
  -550
  -579
  -609
  -641
Cash from operations, $m
  7,506
  7,854
  8,025
  8,217
  8,431
  8,665
  8,920
  9,196
  9,494
  9,813
  10,155
  10,257
  10,645
  11,059
  11,497
  11,962
  12,454
  12,974
  13,524
  14,105
  14,718
  15,364
  16,045
  16,763
  17,519
  18,315
  19,153
  20,035
  20,963
  21,939
  22,965
Maintenance CAPEX, $m
  0
  -3,247
  -3,312
  -3,388
  -3,475
  -3,573
  -3,681
  -3,800
  -3,930
  -4,070
  -4,221
  -4,382
  -4,556
  -4,741
  -4,938
  -5,147
  -5,369
  -5,604
  -5,853
  -6,116
  -6,395
  -6,689
  -6,999
  -7,326
  -7,670
  -8,033
  -8,416
  -8,818
  -9,242
  -9,688
  -10,157
New CAPEX, $m
  -3,823
  -571
  -670
  -766
  -860
  -953
  -1,046
  -1,139
  -1,233
  -1,328
  -1,425
  -1,525
  -1,627
  -1,732
  -1,841
  -1,954
  -2,070
  -2,192
  -2,318
  -2,449
  -2,586
  -2,728
  -2,877
  -3,033
  -3,195
  -3,365
  -3,543
  -3,730
  -3,925
  -4,129
  -4,343
Cash from investing activities, $m
  -2,016
  -3,818
  -3,982
  -4,154
  -4,335
  -4,526
  -4,727
  -4,939
  -5,163
  -5,398
  -5,646
  -5,907
  -6,183
  -6,473
  -6,779
  -7,101
  -7,439
  -7,796
  -8,171
  -8,565
  -8,981
  -9,417
  -9,876
  -10,359
  -10,865
  -11,398
  -11,959
  -12,548
  -13,167
  -13,817
  -14,500
Free cash flow, $m
  5,490
  4,035
  4,043
  4,063
  4,095
  4,139
  4,193
  4,257
  4,331
  4,416
  4,509
  4,349
  4,462
  4,585
  4,718
  4,861
  5,015
  5,179
  5,354
  5,540
  5,737
  5,947
  6,170
  6,405
  6,654
  6,916
  7,194
  7,487
  7,796
  8,121
  8,464
Issuance/(repayment) of debt, $m
  -2,943
  776
  912
  1,043
  1,171
  1,297
  1,423
  1,550
  1,678
  1,808
  1,940
  2,075
  2,214
  2,358
  2,506
  2,659
  2,818
  2,983
  3,154
  3,333
  3,519
  3,713
  3,916
  4,128
  4,349
  4,580
  4,823
  5,076
  5,341
  5,619
  5,911
Issuance/(repurchase) of shares, $m
  -165
  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  
  -3,728
  776
  912
  1,043
  1,171
  1,297
  1,423
  1,550
  1,678
  1,808
  1,940
  2,075
  2,214
  2,358
  2,506
  2,659
  2,818
  2,983
  3,154
  3,333
  3,519
  3,713
  3,916
  4,128
  4,349
  4,580
  4,823
  5,076
  5,341
  5,619
  5,911
Total cash flow (excl. dividends), $m
  1,808
  4,812
  4,955
  5,106
  5,266
  5,436
  5,616
  5,807
  6,009
  6,223
  6,449
  6,425
  6,677
  6,943
  7,224
  7,520
  7,833
  8,161
  8,508
  8,873
  9,256
  9,660
  10,085
  10,532
  11,002
  11,497
  12,017
  12,563
  13,137
  13,741
  14,375
Retained Cash Flow (-), $m
  2,160
  -221
  -238
  -272
  -306
  -339
  -372
  -405
  -438
  -472
  -506
  -542
  -578
  -615
  -654
  -694
  -736
  -779
  -823
  -870
  -919
  -969
  -1,022
  -1,077
  -1,135
  -1,196
  -1,259
  -1,325
  -1,394
  -1,467
  -1,543
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
 
  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
 
  4,591
  4,717
  4,834
  4,960
  5,097
  5,244
  5,402
  5,571
  5,751
  5,943
  5,883
  6,099
  6,328
  6,570
  6,826
  7,097
  7,383
  7,684
  8,003
  8,338
  8,691
  9,063
  9,455
  9,867
  10,301
  10,758
  11,238
  11,743
  12,274
  12,832
Discount rate, %
 
  5.20
  5.46
  5.73
  6.02
  6.32
  6.64
  6.97
  7.32
  7.68
  8.07
  8.47
  8.89
  9.34
  9.81
  10.30
  10.81
  11.35
  11.92
  12.51
  13.14
  13.80
  14.49
  15.21
  15.97
  16.77
  17.61
  18.49
  19.41
  20.38
  21.40
PV of cash for distribution, $m
 
  4,364
  4,241
  4,089
  3,926
  3,752
  3,567
  3,371
  3,167
  2,954
  2,736
  2,405
  2,194
  1,982
  1,774
  1,570
  1,373
  1,187
  1,012
  852
  706
  576
  462
  364
  282
  214
  159
  115
  82
  57
  38
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

BT Group plc is a communications services company. The Company is engaged in selling fixed-voice services, broadband, mobile and television products and services, as well as managed networked information technology (IT) solutions and cyber security protection. Its segments include Consumer, which provides fixed-voice, broadband, TV and mobile services; EE, which is a mobile network operator in the United Kingdom and provides mobile and fixed communications services to consumers; Business and Public Sector, which provides communications and IT services to businesses and the public sector in the United Kingdom and the Republic of Ireland (RoI) ;Global Services, which provides managed networked IT services to corporate customers; Wholesale and Ventures, which provides fixed and mobile services to communications providers (CPs); and Openreach, which provides copper and fiber connections between its exchanges and homes and businesses.

FINANCIAL RATIOS  of  BT Group ADR (BT)

Valuation Ratios
P/E Ratio 77.8
Price to Sales 6.2
Price to Book 17.8
Price to Tangible Book
Price to Cash Flow 24
Price to Free Cash Flow 49
Growth Rates
Sales Growth Rate 27.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 27.5%
Cap. Spend. - 3 Yr. Gr. Rate 5.9%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 120.9%
Total Debt to Equity 152.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.7%
Ret/ On Assets - 3 Yr. Avg. 8%
Return On Total Capital 8.3%
Ret/ On T. Cap. - 3 Yr. Avg. 14.6%
Return On Equity 20.7%
Return On Equity - 3 Yr. Avg. 682.5%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 76.9%
Gross Margin - 3 Yr. Avg. 77%
EBITDA Margin 27.2%
EBITDA Margin - 3 Yr. Avg. 30.6%
Operating Margin 12.3%
Oper. Margin - 3 Yr. Avg. 16%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 13.3%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 11%
Effective Tax Rate 18.9%
Eff/ Tax Rate - 3 Yr. Avg. 17.8%
Payout Ratio 75.2%

BT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BT stock intrinsic value calculation we used $29276 million for the last fiscal year's total revenue generated by BT Group ADR. The default revenue input number comes from 2017 income statement of BT Group 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 BT stock valuation model: a) initial revenue growth rate of 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 5.2%, whose default value for BT is calculated based on our internal credit rating of BT Group 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 BT Group 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 BT stock the variable cost ratio is equal to 82.1%.

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 BT 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 4.6% for BT Group ADR.

Corporate tax rate of 27% is the nominal tax rate for BT Group 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 BT 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 BT are equal to 97.6%.

Life of production assets of 8.8 years is the average useful life of capital assets used in BT Group 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 BT is equal to -14.4%. 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 - $10133 million for BT Group 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 1962.55 million for BT Group 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 BT Group ADR at the current share price and the inputted number of shares is $35.6 billion.

RELATED COMPANIES Price Int.Val. Rating
VOD Vodafone Group 28.98 17.21  sell
TEF Telefonica ADR 10.38 8.04  sell
ORAN Orange ADR 16.01 21.88  buy
TI Telecom Italia 9.12 21.75  str.buy

COMPANY NEWS

▶ BT's Rake Says Recovering Well After Italy Scandal   [Oct-20-17 02:50AM  Bloomberg Video]
▶ Is It Time To Buy BT Group plc (LSE:BTA)?   [Oct-17-17 06:47AM  Simply Wall St.]
▶ Stocks That Fell to 3-Year Lows in the Week of Oct. 6   [Oct-08-17 04:29PM  GuruFocus.com]
▶ When Should You Buy BT Group plc (LSE:BTA)?   [Sep-29-17 09:56AM  Simply Wall St.]
▶ Is It The Right Time To Buy BT Group plc (LSE:BTA)?   [Sep-14-17 10:45AM  Simply Wall St.]
▶ Stocks That Fell to 3-Year Lows Last Week   [Sep-08-17 11:07PM  GuruFocus.com]
▶ Cobalt Joins BT Radianz Cloud   [Sep-06-17 10:32AM  PR Newswire]
▶ The 10 Highest Dividend Yielding Stocks   [06:02AM  Motley Fool]
▶ BT Announces Business Platform-as-a-Service   [Aug-31-17 08:47AM  PR Newswire]
▶ ETFs with exposure to BT Group Plc : August 21, 2017   [Aug-21-17 03:52PM  Capital Cube]
▶ BT Group posts 1Q profit   [Jul-28-17 08:04PM  Associated Press]
▶ BT's Endless Torment   [07:12AM  Bloomberg]
▶ BT And KPMG Warn Businesses Against Cyber Security Traps   [Jul-10-17 09:43AM  PR Newswire]
▶ PRESS DIGEST- British Business - July 10   [Jul-09-17 07:48PM  Reuters]
▶ PRESS DIGEST- British Business - July 5   [Jul-04-17 07:27PM  Reuters]
▶ ETFs with exposure to BT Group Plc : June 26, 2017   [Jun-26-17 03:28PM  Capital Cube]
▶ PRESS DIGEST- British Business - June 20   [Jun-19-17 07:18PM  Reuters]
▶ Telefonica Leads Europe in Move to Converged Services   [Jun-16-17 07:00AM  Morningstar]
▶ ETFs with exposure to BT Group Plc : June 13, 2017   [Jun-13-17 12:18PM  Capital Cube]
▶ BT to drop auditors PwC, hire KPMG   [06:50AM  Reuters]
▶ ETFs with exposure to BT Group Plc : June 2, 2017   [Jun-02-17 01:56PM  Capital Cube]
▶ BT Group Plc Value Analysis (LONDON:BT.A) : May 30, 2017   [May-30-17 01:01PM  Capital Cube]
▶ PRESS DIGEST- British Business - May 29   [May-28-17 07:51PM  Reuters]
▶ PRESS DIGEST- Financial Times - May 26   [May-25-17 08:14PM  Reuters]
▶ [$$] BT faces potential £232m tax bill in Brazil   [May-22-17 10:05AM  Financial Times]
▶ PRESS DIGEST- British Business - May 12   [May-11-17 07:25PM  Reuters]
▶ BT Group posts 4Q profit   [03:10PM  Associated Press]
▶ [$$] BT Group: operator waiting   [10:34AM  Financial Times]
▶ [$$] BT Cuts 4,000 Jobs and CEO Bonus as Profit Falls   [06:17AM  The Wall Street Journal]
Financial statements of BT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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