Intrinsic value of Canon ADR - CAJ

Previous Close

$31.83

  Intrinsic Value

$36.40

stock screener

  Rating & Target

hold

+14%

Previous close

$31.83

 
Intrinsic value

$36.40

 
Up/down potential

+14%

 
Rating

hold

We calculate the intrinsic value of CAJ 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 34.8

 

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, %
  24.60
  22.64
  20.88
  19.29
  17.86
  16.57
  15.42
  14.37
  13.44
  12.59
  11.83
  11.15
  10.54
  9.98
  9.48
  9.04
  8.63
  8.27
  7.94
  7.65
  7.38
  7.14
  6.93
  6.74
  6.56
  6.41
  6.27
  6.14
  6.03
  5.92
Revenue, $m
  45,114
  55,328
  66,878
  79,778
  94,026
  109,609
  126,507
  144,691
  164,134
  184,804
  206,674
  229,719
  253,922
  279,268
  305,754
  333,380
  362,157
  392,103
  423,243
  455,611
  489,249
  524,203
  560,532
  598,295
  637,564
  678,413
  720,925
  765,188
  811,296
  859,351
Variable operating expenses, $m
  38,592
  47,056
  56,628
  67,318
  79,126
  92,040
  106,044
  121,114
  137,227
  154,356
  171,276
  190,374
  210,431
  231,436
  253,386
  276,280
  300,128
  324,945
  350,752
  377,576
  405,452
  434,420
  464,526
  495,822
  528,365
  562,218
  597,448
  634,130
  672,341
  712,165
Fixed operating expenses, $m
  2,155
  2,203
  2,251
  2,301
  2,351
  2,403
  2,456
  2,510
  2,565
  2,622
  2,679
  2,738
  2,799
  2,860
  2,923
  2,987
  3,053
  3,120
  3,189
  3,259
  3,331
  3,404
  3,479
  3,555
  3,634
  3,714
  3,795
  3,879
  3,964
  4,051
Total operating expenses, $m
  40,747
  49,259
  58,879
  69,619
  81,477
  94,443
  108,500
  123,624
  139,792
  156,978
  173,955
  193,112
  213,230
  234,296
  256,309
  279,267
  303,181
  328,065
  353,941
  380,835
  408,783
  437,824
  468,005
  499,377
  531,999
  565,932
  601,243
  638,009
  676,305
  716,216
Operating income, $m
  4,367
  6,069
  7,998
  10,158
  12,548
  15,165
  18,007
  21,067
  24,342
  27,826
  32,719
  36,607
  40,692
  44,972
  49,445
  54,112
  58,975
  64,037
  69,302
  74,776
  80,465
  86,379
  92,526
  98,918
  105,565
  112,482
  119,681
  127,179
  134,991
  143,134
EBITDA, $m
  8,319
  10,643
  13,276
  16,222
  19,479
  23,045
  26,916
  31,084
  35,543
  40,285
  45,305
  50,597
  56,156
  61,979
  68,065
  74,415
  81,031
  87,916
  95,078
  102,523
  110,261
  118,303
  126,663
  135,354
  144,393
  153,797
  163,586
  173,779
  184,399
  195,469
Interest expense (income), $m
  6
  255
  530
  845
  1,201
  1,598
  2,037
  2,518
  3,038
  3,599
  4,198
  4,835
  5,509
  6,219
  6,965
  7,746
  8,562
  9,414
  10,301
  11,224
  12,183
  13,181
  14,217
  15,295
  16,414
  17,578
  18,788
  20,047
  21,357
  22,721
  24,142
Earnings before tax, $m
  4,111
  5,539
  7,154
  8,957
  10,950
  13,128
  15,489
  18,029
  20,743
  23,628
  27,884
  31,098
  34,473
  38,006
  41,699
  45,550
  49,562
  53,737
  58,079
  62,593
  67,285
  72,162
  77,232
  82,504
  87,987
  93,694
  99,634
  105,822
  112,270
  118,992
Tax expense, $m
  1,110
  1,495
  1,931
  2,419
  2,956
  3,545
  4,182
  4,868
  5,601
  6,380
  7,529
  8,396
  9,308
  10,262
  11,259
  12,298
  13,382
  14,509
  15,681
  16,900
  18,167
  19,484
  20,853
  22,276
  23,757
  25,297
  26,901
  28,572
  30,313
  32,128
Net income, $m
  3,001
  4,043
  5,222
  6,539
  7,993
  9,583
  11,307
  13,161
  15,142
  17,248
  20,355
  22,701
  25,165
  27,745
  30,440
  33,251
  36,180
  39,228
  42,397
  45,693
  49,118
  52,678
  56,379
  60,228
  64,231
  68,396
  72,733
  77,250
  81,957
  86,864

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
  57,470
  70,481
  85,195
  101,628
  119,778
  139,629
  161,155
  184,320
  209,088
  235,419
  263,279
  292,636
  323,467
  355,756
  389,495
  424,688
  461,346
  499,494
  539,163
  580,396
  623,247
  667,775
  714,053
  762,160
  812,183
  864,221
  918,376
  974,762
  1,033,499
  1,094,715
Adjusted assets (=assets-cash), $m
  57,470
  70,481
  85,195
  101,628
  119,778
  139,629
  161,155
  184,320
  209,088
  235,419
  263,279
  292,636
  323,467
  355,756
  389,495
  424,688
  461,346
  499,494
  539,163
  580,396
  623,247
  667,775
  714,053
  762,160
  812,183
  864,221
  918,376
  974,762
  1,033,499
  1,094,715
Revenue / Adjusted assets
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
  0.785
Average production assets, $m
  27,474
  33,695
  40,729
  48,585
  57,262
  66,752
  77,042
  88,117
  99,957
  112,546
  125,864
  139,899
  154,638
  170,074
  186,204
  203,028
  220,554
  238,791
  257,755
  277,467
  297,952
  319,240
  341,364
  364,362
  388,276
  413,154
  439,043
  465,999
  494,080
  523,345
Working capital, $m
  2,075
  2,545
  3,076
  3,670
  4,325
  5,042
  5,819
  6,656
  7,550
  8,501
  9,507
  10,567
  11,680
  12,846
  14,065
  15,335
  16,659
  18,037
  19,469
  20,958
  22,505
  24,113
  25,784
  27,522
  29,328
  31,207
  33,163
  35,199
  37,320
  39,530
Total debt, $m
  9,817
  15,646
  22,238
  29,599
  37,731
  46,624
  56,268
  66,646
  77,742
  89,538
  102,019
  115,171
  128,984
  143,449
  158,564
  174,330
  190,754
  207,844
  225,615
  244,088
  263,285
  283,234
  303,966
  325,518
  347,929
  371,241
  395,503
  420,764
  447,078
  474,502
Total liabilities, $m
  25,747
  31,576
  38,167
  45,529
  53,660
  62,554
  72,197
  82,575
  93,671
  105,468
  117,949
  131,101
  144,913
  159,379
  174,494
  190,260
  206,683
  223,773
  241,545
  260,018
  279,214
  299,163
  319,896
  341,448
  363,858
  387,171
  411,432
  436,693
  463,007
  490,432
Total equity, $m
  31,723
  38,906
  47,028
  56,098
  66,117
  77,075
  88,957
  101,745
  115,416
  129,951
  145,330
  161,535
  178,554
  196,377
  215,001
  234,428
  254,663
  275,721
  297,618
  320,379
  344,032
  368,612
  394,157
  420,712
  448,325
  477,050
  506,944
  538,068
  570,491
  604,282
Total liabilities and equity, $m
  57,470
  70,482
  85,195
  101,627
  119,777
  139,629
  161,154
  184,320
  209,087
  235,419
  263,279
  292,636
  323,467
  355,756
  389,495
  424,688
  461,346
  499,494
  539,163
  580,397
  623,246
  667,775
  714,053
  762,160
  812,183
  864,221
  918,376
  974,761
  1,033,498
  1,094,714
Debt-to-equity ratio
  0.310
  0.400
  0.470
  0.530
  0.570
  0.600
  0.630
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.730
  0.740
  0.740
  0.750
  0.750
  0.760
  0.760
  0.770
  0.770
  0.770
  0.770
  0.780
  0.780
  0.780
  0.780
  0.780
  0.790
Adjusted equity ratio
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552
  0.552

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,001
  4,043
  5,222
  6,539
  7,993
  9,583
  11,307
  13,161
  15,142
  17,248
  20,355
  22,701
  25,165
  27,745
  30,440
  33,251
  36,180
  39,228
  42,397
  45,693
  49,118
  52,678
  56,379
  60,228
  64,231
  68,396
  72,733
  77,250
  81,957
  86,864
Depreciation, amort., depletion, $m
  3,952
  4,574
  5,278
  6,063
  6,931
  7,880
  8,909
  10,017
  11,201
  12,459
  12,586
  13,990
  15,464
  17,007
  18,620
  20,303
  22,055
  23,879
  25,775
  27,747
  29,795
  31,924
  34,136
  36,436
  38,828
  41,315
  43,904
  46,600
  49,408
  52,334
Funds from operations, $m
  6,954
  8,617
  10,500
  12,602
  14,924
  17,463
  20,216
  23,177
  26,343
  29,708
  32,942
  36,691
  40,629
  44,752
  49,060
  53,554
  58,235
  63,107
  68,173
  73,439
  78,913
  84,602
  90,515
  96,664
  103,058
  109,712
  116,637
  123,850
  131,365
  139,199
Change in working capital, $m
  410
  470
  531
  593
  655
  717
  777
  837
  894
  951
  1,006
  1,060
  1,113
  1,166
  1,218
  1,271
  1,324
  1,378
  1,432
  1,489
  1,547
  1,608
  1,671
  1,737
  1,806
  1,879
  1,956
  2,036
  2,121
  2,211
Cash from operations, $m
  6,544
  8,148
  9,968
  12,009
  14,269
  16,747
  19,439
  22,341
  25,449
  28,757
  31,935
  35,631
  39,516
  43,586
  47,842
  52,283
  56,912
  61,729
  66,740
  71,950
  77,366
  82,994
  88,844
  94,927
  101,252
  107,833
  114,682
  121,814
  129,244
  136,988
Maintenance CAPEX, $m
  -2,204
  -2,747
  -3,369
  -4,073
  -4,858
  -5,726
  -6,675
  -7,704
  -8,812
  -9,996
  -11,255
  -12,586
  -13,990
  -15,464
  -17,007
  -18,620
  -20,303
  -22,055
  -23,879
  -25,775
  -27,747
  -29,795
  -31,924
  -34,136
  -36,436
  -38,828
  -41,315
  -43,904
  -46,600
  -49,408
New CAPEX, $m
  -5,436
  -6,220
  -7,034
  -7,856
  -8,677
  -9,490
  -10,291
  -11,075
  -11,840
  -12,588
  -13,319
  -14,035
  -14,739
  -15,436
  -16,130
  -16,824
  -17,525
  -18,237
  -18,964
  -19,712
  -20,485
  -21,288
  -22,124
  -22,998
  -23,915
  -24,877
  -25,890
  -26,956
  -28,080
  -29,265
Cash from investing activities, $m
  -7,640
  -8,967
  -10,403
  -11,929
  -13,535
  -15,216
  -16,966
  -18,779
  -20,652
  -22,584
  -24,574
  -26,621
  -28,729
  -30,900
  -33,137
  -35,444
  -37,828
  -40,292
  -42,843
  -45,487
  -48,232
  -51,083
  -54,048
  -57,134
  -60,351
  -63,705
  -67,205
  -70,860
  -74,680
  -78,673
Free cash flow, $m
  -1,096
  -820
  -435
  80
  733
  1,530
  2,473
  3,562
  4,797
  6,173
  7,362
  9,010
  10,786
  12,686
  14,705
  16,839
  19,084
  21,437
  23,897
  26,463
  29,134
  31,911
  34,797
  37,792
  40,901
  44,128
  47,477
  50,953
  54,564
  58,315
Issuance/(repayment) of debt, $m
  5,091
  5,829
  6,592
  7,362
  8,131
  8,893
  9,643
  10,378
  11,096
  11,796
  12,481
  13,152
  13,812
  14,465
  15,115
  15,766
  16,423
  17,090
  17,772
  18,473
  19,197
  19,949
  20,732
  21,552
  22,411
  23,313
  24,262
  25,261
  26,314
  27,425
Issuance/(repurchase) of shares, $m
  3,247
  3,139
  2,900
  2,532
  2,026
  1,375
  575
  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  
  8,338
  8,968
  9,492
  9,894
  10,157
  10,268
  10,218
  10,378
  11,096
  11,796
  12,481
  13,152
  13,812
  14,465
  15,115
  15,766
  16,423
  17,090
  17,772
  18,473
  19,197
  19,949
  20,732
  21,552
  22,411
  23,313
  24,262
  25,261
  26,314
  27,425
Total cash flow (excl. dividends), $m
  7,242
  8,148
  9,056
  9,974
  10,890
  11,798
  12,692
  13,940
  15,892
  17,969
  19,843
  22,162
  24,599
  27,152
  29,820
  32,605
  35,507
  38,527
  41,669
  44,935
  48,331
  51,860
  55,529
  59,344
  63,312
  67,441
  71,738
  76,214
  80,878
  85,740
Retained Cash Flow (-), $m
  -6,248
  -7,182
  -8,122
  -9,071
  -10,019
  -10,958
  -11,882
  -12,787
  -13,672
  -14,535
  -15,379
  -16,205
  -17,019
  -17,823
  -18,624
  -19,426
  -20,236
  -21,057
  -21,897
  -22,761
  -23,653
  -24,580
  -25,545
  -26,555
  -27,613
  -28,725
  -29,894
  -31,125
  -32,423
  -33,791
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
  993
  966
  935
  903
  871
  840
  809
  1,153
  2,221
  3,435
  4,465
  5,957
  7,580
  9,328
  11,196
  13,179
  15,271
  17,470
  19,771
  22,174
  24,677
  27,280
  29,984
  32,789
  35,699
  38,716
  41,845
  45,089
  48,455
  51,948
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
  953
  884
  813
  743
  675
  610
  547
  721
  1,276
  1,801
  2,120
  2,542
  2,882
  3,132
  3,287
  3,349
  3,323
  3,217
  3,044
  2,818
  2,552
  2,264
  1,965
  1,670
  1,389
  1,130
  898
  698
  529
  391
Current shareholders' claim on cash, %
  91.5
  85.3
  80.9
  77.8
  75.8
  74.6
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2
  74.2

Canon Inc. (Canon) is a manufacturer of office multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras and lithography equipment. Canon sells its products principally under the Canon brand name and through sales subsidiaries. Each of these subsidiaries is responsible for marketing and distribution to retail dealers in an assigned territory. Canon operates its business in three segments: the Office Business Unit, the Imaging System Business Unit, and the Industry and Others Business Unit. Canon's research and development activities range from basic research to product-oriented research directed at maintaining Canon's technological operations in the marketplace. Canon has manufacturing subsidiaries in a range of countries, including the United States, Germany, France, the Netherlands, Taiwan, China, Malaysia, Thailand, Vietnam and the Philippines.

FINANCIAL RATIOS  of  Canon ADR (CAJ)

Valuation Ratios
P/E Ratio 26.5
Price to Sales 1.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 8
Price to Free Cash Flow 13.6
Growth Rates
Sales Growth Rate -10.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.2%
Cap. Spend. - 3 Yr. Gr. Rate -2.4%
Financial Strength
Quick Ratio 345
Current Ratio 0
LT Debt to Equity 22%
Total Debt to Equity 22%
Interest Coverage 356
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 4.7%
Ret/ On T. Cap. - 3 Yr. Avg. 6.9%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 49.2%
Gross Margin - 3 Yr. Avg. 50%
EBITDA Margin 14.6%
EBITDA Margin - 3 Yr. Avg. 16.1%
Operating Margin 6.7%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 7.2%
Pre-Tax Margin - 3 Yr. Avg. 8.9%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 33.8%
Eff/ Tax Rate - 3 Yr. Avg. 32.7%
Payout Ratio 108.8%

CAJ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CAJ stock intrinsic value calculation we used $36207 million for the last fiscal year's total revenue generated by Canon ADR. The default revenue input number comes from 2017 income statement of Canon 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 CAJ stock valuation model: a) initial revenue growth rate of 24.6% 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 CAJ is calculated based on our internal credit rating of Canon 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 Canon 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 CAJ stock the variable cost ratio is equal to 86.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2109 million in the base year in the intrinsic value calculation for CAJ 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 Canon ADR.

Corporate tax rate of 27% is the nominal tax rate for Canon 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 CAJ 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 CAJ are equal to 60.9%.

Life of production assets of 10 years is the average useful life of capital assets used in Canon 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 CAJ is equal to 4.6%. 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 - $25475 million for Canon 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 1092 million for Canon 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 Canon ADR at the current share price and the inputted number of shares is $34.8 billion.

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COMPANY NEWS

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