Intrinsic value of Facebook, Inc. - FB

Previous Close

$187.49

  Intrinsic Value

$359.99

stock screener

  Rating & Target

str. buy

+92%

Previous close

$187.49

 
Intrinsic value

$359.99

 
Up/down potential

+92%

 
Rating

str. buy

We calculate the intrinsic value of FB 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 535.1

 

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, %
  30.40
  27.86
  25.57
  23.52
  21.66
  20.00
  18.50
  17.15
  15.93
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
Revenue, $m
  72,813
  93,098
  116,907
  144,400
  175,684
  210,818
  249,817
  292,657
  339,289
  389,641
  443,631
  501,174
  562,185
  626,591
  694,330
  765,357
  839,648
  917,198
  998,025
  1,082,170
  1,169,696
  1,260,690
  1,355,258
  1,453,531
  1,555,657
  1,661,806
  1,772,169
  1,886,952
  2,006,383
  2,130,706
Variable operating expenses, $m
  35,874
  45,181
  56,105
  68,718
  83,071
  99,191
  117,083
  136,738
  158,132
  181,234
  203,536
  229,936
  257,928
  287,477
  318,555
  351,142
  385,227
  420,806
  457,889
  496,495
  536,651
  578,399
  621,786
  666,873
  713,728
  762,429
  813,063
  865,725
  920,519
  977,558
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
  35,874
  45,181
  56,105
  68,718
  83,071
  99,191
  117,083
  136,738
  158,132
  181,234
  203,536
  229,936
  257,928
  287,477
  318,555
  351,142
  385,227
  420,806
  457,889
  496,495
  536,651
  578,399
  621,786
  666,873
  713,728
  762,429
  813,063
  865,725
  920,519
  977,558
Operating income, $m
  36,938
  47,917
  60,803
  75,682
  92,613
  111,628
  132,734
  155,919
  181,156
  208,407
  240,095
  271,237
  304,257
  339,114
  375,774
  414,215
  454,421
  496,392
  540,136
  585,675
  633,045
  682,291
  733,472
  786,658
  841,929
  899,377
  959,106
  1,021,227
  1,085,864
  1,153,148
EBITDA, $m
  43,583
  55,726
  69,977
  86,433
  105,159
  126,189
  149,532
  175,175
  203,087
  233,226
  265,543
  299,986
  336,506
  375,057
  415,603
  458,118
  502,586
  549,005
  597,385
  647,752
  700,142
  754,608
  811,213
  870,036
  931,165
  994,703
  1,060,762
  1,129,468
  1,200,955
  1,275,371
Interest expense (income), $m
  11
  0
  217
  477
  781
  1,132
  1,532
  1,981
  2,480
  3,027
  3,623
  4,267
  4,957
  5,693
  6,472
  7,296
  8,161
  9,069
  10,019
  11,010
  12,043
  13,118
  14,237
  15,400
  16,609
  17,865
  19,170
  20,527
  21,938
  23,405
  24,931
Earnings before tax, $m
  36,938
  47,700
  60,326
  74,901
  91,480
  110,095
  130,752
  153,439
  178,129
  204,784
  235,828
  266,280
  298,565
  332,642
  368,479
  406,053
  445,352
  486,373
  529,126
  573,632
  619,927
  668,054
  718,072
  770,049
  824,064
  880,207
  938,579
  999,290
  1,062,459
  1,128,217
Tax expense, $m
  9,973
  12,879
  16,288
  20,223
  24,700
  29,726
  35,303
  41,429
  48,095
  55,292
  63,674
  71,896
  80,612
  89,813
  99,489
  109,634
  120,245
  131,321
  142,864
  154,881
  167,380
  180,375
  193,879
  207,913
  222,497
  237,656
  253,416
  269,808
  286,864
  304,619
Net income, $m
  26,965
  34,821
  44,038
  54,677
  66,781
  80,370
  95,449
  112,011
  130,034
  149,492
  172,155
  194,385
  217,952
  242,828
  268,990
  296,419
  325,107
  355,052
  386,262
  418,752
  452,546
  487,679
  524,192
  562,135
  601,566
  642,551
  685,163
  729,481
  775,595
  823,598

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
  82,461
  105,434
  132,398
  163,533
  198,963
  238,752
  282,918
  331,435
  384,245
  441,269
  502,414
  567,581
  636,676
  709,616
  786,330
  866,769
  950,904
  1,038,729
  1,130,266
  1,225,561
  1,324,685
  1,427,735
  1,534,834
  1,646,128
  1,761,786
  1,882,000
  2,006,986
  2,136,979
  2,272,235
  2,413,031
Adjusted assets (=assets-cash), $m
  82,461
  105,434
  132,398
  163,533
  198,963
  238,752
  282,918
  331,435
  384,245
  441,269
  502,414
  567,581
  636,676
  709,616
  786,330
  866,769
  950,904
  1,038,729
  1,130,266
  1,225,561
  1,324,685
  1,427,735
  1,534,834
  1,646,128
  1,761,786
  1,882,000
  2,006,986
  2,136,979
  2,272,235
  2,413,031
Revenue / Adjusted assets
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
  0.883
Average production assets, $m
  38,008
  48,597
  61,026
  75,377
  91,707
  110,047
  130,404
  152,767
  177,109
  203,393
  231,575
  261,613
  293,461
  327,080
  362,440
  399,516
  438,296
  478,777
  520,969
  564,893
  610,582
  658,080
  707,445
  758,743
  812,053
  867,463
  925,072
  984,989
  1,047,332
  1,112,229
Working capital, $m
  3,058
  3,910
  4,910
  6,065
  7,379
  8,854
  10,492
  12,292
  14,250
  16,365
  18,633
  21,049
  23,612
  26,317
  29,162
  32,145
  35,265
  38,522
  41,917
  45,451
  49,127
  52,949
  56,921
  61,048
  65,338
  69,796
  74,431
  79,252
  84,268
  89,490
Total debt, $m
  4,027
  8,829
  14,464
  20,971
  28,376
  36,692
  45,923
  56,063
  67,100
  79,018
  91,797
  105,417
  119,858
  135,103
  151,136
  167,948
  185,532
  203,887
  223,019
  242,935
  263,652
  285,190
  307,573
  330,834
  355,006
  380,131
  406,253
  433,422
  461,690
  491,116
Total liabilities, $m
  17,234
  22,036
  27,671
  34,178
  41,583
  49,899
  59,130
  69,270
  80,307
  92,225
  105,004
  118,624
  133,065
  148,310
  164,343
  181,155
  198,739
  217,094
  236,226
  256,142
  276,859
  298,397
  320,780
  344,041
  368,213
  393,338
  419,460
  446,629
  474,897
  504,323
Total equity, $m
  65,226
  83,398
  104,727
  129,355
  157,380
  188,853
  223,788
  262,165
  303,938
  349,044
  397,409
  448,956
  503,611
  561,306
  621,987
  685,614
  752,165
  821,635
  894,040
  969,418
  1,047,825
  1,129,338
  1,214,054
  1,302,087
  1,393,572
  1,488,662
  1,587,526
  1,690,350
  1,797,338
  1,908,707
Total liabilities and equity, $m
  82,460
  105,434
  132,398
  163,533
  198,963
  238,752
  282,918
  331,435
  384,245
  441,269
  502,413
  567,580
  636,676
  709,616
  786,330
  866,769
  950,904
  1,038,729
  1,130,266
  1,225,560
  1,324,684
  1,427,735
  1,534,834
  1,646,128
  1,761,785
  1,882,000
  2,006,986
  2,136,979
  2,272,235
  2,413,030
Debt-to-equity ratio
  0.060
  0.110
  0.140
  0.160
  0.180
  0.190
  0.210
  0.210
  0.220
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.260
  0.260
  0.260
  0.260
  0.260
Adjusted equity ratio
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791
  0.791

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26,965
  34,821
  44,038
  54,677
  66,781
  80,370
  95,449
  112,011
  130,034
  149,492
  172,155
  194,385
  217,952
  242,828
  268,990
  296,419
  325,107
  355,052
  386,262
  418,752
  452,546
  487,679
  524,192
  562,135
  601,566
  642,551
  685,163
  729,481
  775,595
  823,598
Depreciation, amort., depletion, $m
  6,645
  7,809
  9,174
  10,751
  12,546
  14,561
  16,798
  19,256
  21,931
  24,819
  25,448
  28,749
  32,248
  35,943
  39,829
  43,903
  48,164
  52,613
  57,249
  62,076
  67,097
  72,316
  77,741
  83,378
  89,237
  95,326
  101,656
  108,241
  115,091
  122,223
Funds from operations, $m
  33,610
  42,629
  53,212
  65,429
  79,327
  94,931
  112,248
  131,267
  151,965
  174,311
  197,602
  223,133
  250,201
  278,771
  308,818
  340,322
  373,271
  407,665
  443,511
  480,828
  519,643
  559,996
  601,934
  645,514
  690,803
  737,877
  786,819
  837,722
  890,687
  945,821
Change in working capital, $m
  713
  852
  1,000
  1,155
  1,314
  1,476
  1,638
  1,799
  1,959
  2,115
  2,268
  2,417
  2,562
  2,705
  2,845
  2,983
  3,120
  3,257
  3,395
  3,534
  3,676
  3,822
  3,972
  4,127
  4,289
  4,458
  4,635
  4,821
  5,016
  5,222
Cash from operations, $m
  32,897
  41,777
  52,212
  64,274
  78,013
  93,455
  110,610
  129,467
  150,006
  172,196
  195,335
  220,717
  247,638
  276,066
  305,973
  337,339
  370,151
  404,408
  440,116
  477,294
  515,967
  556,174
  597,962
  641,386
  686,514
  733,418
  782,184
  832,901
  885,670
  940,600
Maintenance CAPEX, $m
  -3,201
  -4,177
  -5,340
  -6,706
  -8,283
  -10,078
  -12,093
  -14,330
  -16,788
  -19,462
  -22,351
  -25,448
  -28,749
  -32,248
  -35,943
  -39,829
  -43,903
  -48,164
  -52,613
  -57,249
  -62,076
  -67,097
  -72,316
  -77,741
  -83,378
  -89,237
  -95,326
  -101,656
  -108,241
  -115,091
New CAPEX, $m
  -8,881
  -10,589
  -12,428
  -14,351
  -16,330
  -18,340
  -20,357
  -22,363
  -24,342
  -26,284
  -28,183
  -30,037
  -31,848
  -33,620
  -35,360
  -37,076
  -38,780
  -40,481
  -42,192
  -43,924
  -45,689
  -47,499
  -49,365
  -51,298
  -53,310
  -55,410
  -57,609
  -59,917
  -62,343
  -64,897
Cash from investing activities, $m
  -12,082
  -14,766
  -17,768
  -21,057
  -24,613
  -28,418
  -32,450
  -36,693
  -41,130
  -45,746
  -50,534
  -55,485
  -60,597
  -65,868
  -71,303
  -76,905
  -82,683
  -88,645
  -94,805
  -101,173
  -107,765
  -114,596
  -121,681
  -129,039
  -136,688
  -144,647
  -152,935
  -161,573
  -170,584
  -179,988
Free cash flow, $m
  20,815
  27,011
  34,444
  43,217
  53,399
  65,038
  78,159
  92,774
  108,877
  126,450
  144,801
  165,232
  187,042
  210,198
  234,671
  260,434
  287,469
  315,763
  345,312
  376,121
  408,202
  441,579
  476,281
  512,347
  549,826
  588,772
  629,249
  671,328
  715,087
  760,612
Issuance/(repayment) of debt, $m
  4,027
  4,801
  5,635
  6,507
  7,405
  8,316
  9,231
  10,140
  11,037
  11,918
  12,779
  13,620
  14,441
  15,244
  16,033
  16,812
  17,584
  18,356
  19,131
  19,917
  20,717
  21,538
  22,384
  23,260
  24,173
  25,125
  26,122
  27,168
  28,268
  29,426
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  
  4,027
  4,801
  5,635
  6,507
  7,405
  8,316
  9,231
  10,140
  11,037
  11,918
  12,779
  13,620
  14,441
  15,244
  16,033
  16,812
  17,584
  18,356
  19,131
  19,917
  20,717
  21,538
  22,384
  23,260
  24,173
  25,125
  26,122
  27,168
  28,268
  29,426
Total cash flow (excl. dividends), $m
  24,842
  31,813
  40,079
  49,724
  60,804
  73,354
  87,390
  102,914
  119,914
  138,368
  157,580
  178,851
  201,482
  225,442
  250,704
  277,246
  305,053
  334,118
  364,443
  396,037
  428,919
  463,116
  498,664
  535,607
  573,998
  613,897
  655,371
  698,496
  743,355
  790,038
Retained Cash Flow (-), $m
  -15,196
  -18,172
  -21,328
  -24,628
  -28,025
  -31,473
  -34,935
  -38,377
  -41,773
  -45,106
  -48,365
  -51,547
  -54,655
  -57,695
  -60,681
  -63,627
  -66,550
  -69,470
  -72,406
  -75,378
  -78,407
  -81,513
  -84,715
  -88,033
  -91,486
  -95,090
  -98,864
  -102,824
  -106,987
  -111,370
Prev. year cash balance distribution, $m
  34,097
  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
  43,743
  13,641
  18,751
  25,096
  32,779
  41,880
  52,455
  64,538
  78,141
  93,262
  109,215
  127,304
  146,828
  167,747
  190,023
  213,619
  238,502
  264,648
  292,037
  320,659
  350,512
  381,603
  413,949
  447,574
  482,513
  518,807
  556,507
  595,672
  636,368
  678,668
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
  41,940
  12,488
  16,318
  20,664
  25,408
  30,394
  35,438
  40,338
  44,888
  48,894
  51,865
  54,325
  55,827
  56,316
  55,787
  54,285
  51,894
  48,738
  44,965
  40,746
  36,255
  31,663
  27,131
  22,796
  18,770
  15,136
  11,944
  9,216
  6,947
  5,110
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

Facebook, Inc. is focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces. The Company's products include Facebook, Instagram, Messenger, WhatsApp and Oculus. Facebook enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Instagram enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger allows communicating with people and businesses alike across a range of platforms and devices. WhatsApp Messenger is a messaging application that is used by people around the world and is available on a range of mobile platforms. Its Oculus virtual reality technology and content platform offers products that allow people to enter an interactive environment to play games, consume content and connect with others.

FINANCIAL RATIOS  of  Facebook, Inc. (FB)

Valuation Ratios
P/E Ratio 53.1
Price to Sales 19.6
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 33.7
Price to Free Cash Flow 46.7
Growth Rates
Sales Growth Rate 54.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 78%
Cap. Spend. - 3 Yr. Gr. Rate 27%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 1139
Management Effectiveness
Return On Assets 17.9%
Ret/ On Assets - 3 Yr. Avg. 12.1%
Return On Total Capital 19.7%
Ret/ On T. Cap. - 3 Yr. Avg. 13.4%
Return On Equity 19.8%
Return On Equity - 3 Yr. Avg. 13.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 86.3%
Gross Margin - 3 Yr. Avg. 84.3%
EBITDA Margin 53.8%
EBITDA Margin - 3 Yr. Avg. 49.6%
Operating Margin 45%
Oper. Margin - 3 Yr. Avg. 39.9%
Pre-Tax Margin 45.3%
Pre-Tax Margin - 3 Yr. Avg. 39.7%
Net Profit Margin 37%
Net Profit Margin - 3 Yr. Avg. 27%
Effective Tax Rate 18.4%
Eff/ Tax Rate - 3 Yr. Avg. 33%
Payout Ratio 0%

FB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FB stock intrinsic value calculation we used $55838 million for the last fiscal year's total revenue generated by Facebook, Inc.. The default revenue input number comes from 0001 income statement of Facebook, Inc.. 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 FB stock valuation model: a) initial revenue growth rate of 30.4% 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 FB is calculated based on our internal credit rating of Facebook, Inc., 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 Facebook, Inc..
    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 FB stock the variable cost ratio is equal to 50.3%.

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 FB 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 Facebook, Inc..

Corporate tax rate of 27% is the nominal tax rate for Facebook, Inc.. 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 FB 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 FB are equal to 52.2%.

Life of production assets of 9.1 years is the average useful life of capital assets used in Facebook, Inc. 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 FB is equal to 4.2%. 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 - $84127 million for Facebook, Inc. - 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 2854.019 million for Facebook, Inc. 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 Facebook, Inc. at the current share price and the inputted number of shares is $535.1 billion.

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