Intrinsic value of Facebook Cl A - FB

Previous Close

$209.94

  Intrinsic Value

$714.19

stock screener

  Rating & Target

str. buy

+240%

Previous close

$209.94

 
Intrinsic value

$714.19

 
Up/down potential

+240%

 
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 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 609.0

 

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, %
  47.10
  42.89
  39.10
  35.69
  32.62
  29.86
  27.37
  25.14
  23.12
  21.31
  19.68
  18.21
  16.89
  15.70
  14.63
  13.67
  12.80
  12.02
  11.32
  10.69
  10.12
  9.61
  9.15
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
Revenue, $m
  59,801
  85,449
  118,860
  161,283
  213,896
  277,765
  353,799
  442,731
  545,102
  661,266
  791,399
  935,524
  1,093,537
  1,265,236
  1,450,354
  1,648,589
  1,859,628
  2,083,176
  2,318,970
  2,566,800
  2,826,519
  3,098,049
  3,381,393
  3,676,633
  3,983,932
  4,303,537
  4,635,775
  4,981,052
  5,339,852
  5,712,732
Variable operating expenses, $m
  23,153
  32,221
  44,033
  59,031
  77,632
  100,213
  127,094
  158,536
  194,729
  235,798
  279,795
  330,750
  386,614
  447,318
  512,765
  582,850
  657,462
  736,496
  819,860
  907,479
  999,301
  1,095,299
  1,195,474
  1,299,855
  1,408,499
  1,521,493
  1,638,954
  1,761,025
  1,887,877
  2,019,707
Fixed operating expenses, $m
  4,267
  4,361
  4,457
  4,555
  4,655
  4,757
  4,862
  4,969
  5,078
  5,190
  5,304
  5,421
  5,540
  5,662
  5,787
  5,914
  6,044
  6,177
  6,313
  6,452
  6,594
  6,739
  6,887
  7,038
  7,193
  7,352
  7,513
  7,679
  7,848
  8,020
Total operating expenses, $m
  27,420
  36,582
  48,490
  63,586
  82,287
  104,970
  131,956
  163,505
  199,807
  240,988
  285,099
  336,171
  392,154
  452,980
  518,552
  588,764
  663,506
  742,673
  826,173
  913,931
  1,005,895
  1,102,038
  1,202,361
  1,306,893
  1,415,692
  1,528,845
  1,646,467
  1,768,704
  1,895,725
  2,027,727
Operating income, $m
  32,381
  48,868
  70,371
  97,697
  131,609
  172,795
  221,843
  279,226
  345,296
  420,278
  506,300
  599,353
  701,382
  812,256
  931,802
  1,059,825
  1,196,122
  1,340,503
  1,492,797
  1,652,869
  1,820,624
  1,996,011
  2,179,032
  2,369,740
  2,568,240
  2,774,692
  2,989,307
  3,212,348
  3,444,127
  3,685,005
EBITDA, $m
  39,032
  57,509
  81,605
  112,223
  150,218
  196,360
  251,308
  315,593
  389,606
  473,603
  567,712
  671,950
  786,241
  910,438
  1,044,350
  1,187,755
  1,340,429
  1,502,157
  1,672,749
  1,852,053
  2,039,962
  2,236,420
  2,441,428
  2,655,046
  2,877,393
  3,108,646
  3,349,043
  3,598,878
  3,858,500
  4,128,313
Interest expense (income), $m
  11
  0
  261
  608
  1,061
  1,635
  2,348
  3,213
  4,243
  5,448
  6,835
  8,408
  10,171
  12,123
  14,264
  16,590
  19,098
  21,783
  24,642
  27,670
  30,864
  34,221
  37,740
  41,418
  45,256
  49,256
  53,418
  57,748
  62,248
  66,926
  71,786
Earnings before tax, $m
  32,381
  48,607
  69,763
  96,636
  129,974
  170,447
  218,630
  274,983
  339,848
  413,444
  497,892
  589,182
  689,259
  797,992
  915,212
  1,040,727
  1,174,339
  1,315,861
  1,465,127
  1,622,005
  1,786,403
  1,958,272
  2,137,614
  2,324,484
  2,518,984
  2,721,274
  2,931,559
  3,150,100
  3,377,202
  3,613,219
Tax expense, $m
  8,743
  13,124
  18,836
  26,092
  35,093
  46,021
  59,030
  74,245
  91,759
  111,630
  134,431
  159,079
  186,100
  215,458
  247,107
  280,996
  317,072
  355,282
  395,584
  437,941
  482,329
  528,733
  577,156
  627,611
  680,126
  734,744
  791,521
  850,527
  911,844
  975,569
Net income, $m
  23,638
  35,483
  50,927
  70,545
  94,881
  124,426
  159,600
  200,738
  248,089
  301,814
  363,461
  430,103
  503,159
  582,534
  668,105
  759,731
  857,268
  960,578
  1,069,543
  1,184,064
  1,304,074
  1,429,538
  1,560,458
  1,696,873
  1,838,859
  1,986,530
  2,140,038
  2,299,573
  2,465,357
  2,637,650

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
  68,500
  97,880
  136,152
  184,745
  245,013
  318,173
  405,268
  507,138
  624,401
  757,464
  906,528
  1,071,620
  1,252,619
  1,449,296
  1,661,345
  1,888,418
  2,130,158
  2,386,226
  2,656,323
  2,940,206
  3,237,707
  3,548,739
  3,873,303
  4,211,492
  4,563,496
  4,929,596
  5,310,166
  5,705,673
  6,116,669
  6,543,794
Adjusted assets (=assets-cash), $m
  68,500
  97,880
  136,152
  184,745
  245,013
  318,173
  405,268
  507,138
  624,401
  757,464
  906,528
  1,071,620
  1,252,619
  1,449,296
  1,661,345
  1,888,418
  2,130,158
  2,386,226
  2,656,323
  2,940,206
  3,237,707
  3,548,739
  3,873,303
  4,211,492
  4,563,496
  4,929,596
  5,310,166
  5,705,673
  6,116,669
  6,543,794
Revenue / Adjusted assets
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
  0.873
Average production assets, $m
  46,405
  66,308
  92,236
  125,155
  165,983
  215,545
  274,548
  343,559
  423,000
  513,142
  614,126
  725,967
  848,584
  981,823
  1,125,475
  1,279,305
  1,443,071
  1,616,544
  1,799,521
  1,991,837
  2,193,378
  2,404,086
  2,623,961
  2,853,067
  3,091,531
  3,339,545
  3,597,361
  3,865,297
  4,143,725
  4,433,080
Working capital, $m
  -1,136
  -1,624
  -2,258
  -3,064
  -4,064
  -5,278
  -6,722
  -8,412
  -10,357
  -12,564
  -15,037
  -17,775
  -20,777
  -24,039
  -27,557
  -31,323
  -35,333
  -39,580
  -44,060
  -48,769
  -53,704
  -58,863
  -64,246
  -69,856
  -75,695
  -81,767
  -88,080
  -94,640
  -101,457
  -108,542
Total debt, $m
  4,825
  11,259
  19,640
  30,282
  43,481
  59,503
  78,577
  100,886
  126,567
  155,708
  188,353
  224,508
  264,147
  307,219
  353,657
  403,386
  456,328
  512,407
  571,558
  633,728
  698,881
  766,997
  838,076
  912,140
  989,229
  1,069,404
  1,152,749
  1,239,365
  1,329,374
  1,422,914
Total liabilities, $m
  15,002
  21,436
  29,817
  40,459
  53,658
  69,680
  88,754
  111,063
  136,744
  165,885
  198,530
  234,685
  274,324
  317,396
  363,834
  413,563
  466,505
  522,584
  581,735
  643,905
  709,058
  777,174
  848,253
  922,317
  999,406
  1,079,581
  1,162,926
  1,249,542
  1,339,551
  1,433,091
Total equity, $m
  53,499
  76,444
  106,334
  144,286
  191,355
  248,493
  316,515
  396,075
  487,658
  591,579
  707,998
  836,935
  978,296
  1,131,900
  1,297,510
  1,474,854
  1,663,653
  1,863,643
  2,074,588
  2,296,301
  2,528,650
  2,771,565
  3,025,049
  3,289,175
  3,564,090
  3,850,014
  4,147,240
  4,456,130
  4,777,118
  5,110,703
Total liabilities and equity, $m
  68,501
  97,880
  136,151
  184,745
  245,013
  318,173
  405,269
  507,138
  624,402
  757,464
  906,528
  1,071,620
  1,252,620
  1,449,296
  1,661,344
  1,888,417
  2,130,158
  2,386,227
  2,656,323
  2,940,206
  3,237,708
  3,548,739
  3,873,302
  4,211,492
  4,563,496
  4,929,595
  5,310,166
  5,705,672
  6,116,669
  6,543,794
Debt-to-equity ratio
  0.090
  0.150
  0.180
  0.210
  0.230
  0.240
  0.250
  0.250
  0.260
  0.260
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.270
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
  0.280
Adjusted equity ratio
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781
  0.781

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  23,638
  35,483
  50,927
  70,545
  94,881
  124,426
  159,600
  200,738
  248,089
  301,814
  363,461
  430,103
  503,159
  582,534
  668,105
  759,731
  857,268
  960,578
  1,069,543
  1,184,064
  1,304,074
  1,429,538
  1,560,458
  1,696,873
  1,838,859
  1,986,530
  2,140,038
  2,299,573
  2,465,357
  2,637,650
Depreciation, amort., depletion, $m
  6,651
  8,641
  11,234
  14,526
  18,609
  23,565
  29,465
  36,366
  44,310
  53,325
  61,413
  72,597
  84,858
  98,182
  112,547
  127,930
  144,307
  161,654
  179,952
  199,184
  219,338
  240,409
  262,396
  285,307
  309,153
  333,954
  359,736
  386,530
  414,373
  443,308
Funds from operations, $m
  30,289
  44,125
  62,161
  85,071
  113,490
  147,991
  189,065
  237,104
  292,399
  355,139
  424,873
  502,700
  588,017
  680,717
  780,653
  887,661
  1,001,575
  1,122,233
  1,249,495
  1,383,248
  1,523,412
  1,669,947
  1,822,855
  1,982,180
  2,148,012
  2,320,484
  2,499,774
  2,686,102
  2,879,730
  3,080,958
Change in working capital, $m
  -364
  -487
  -635
  -806
  -1,000
  -1,214
  -1,445
  -1,690
  -1,945
  -2,207
  -2,473
  -2,738
  -3,002
  -3,262
  -3,517
  -3,766
  -4,010
  -4,247
  -4,480
  -4,709
  -4,935
  -5,159
  -5,384
  -5,610
  -5,839
  -6,072
  -6,313
  -6,560
  -6,817
  -7,085
Cash from operations, $m
  30,653
  44,612
  62,796
  85,877
  114,489
  149,205
  190,510
  238,794
  294,344
  357,346
  427,346
  505,438
  591,020
  683,979
  784,170
  891,428
  1,005,584
  1,126,480
  1,253,975
  1,387,956
  1,528,346
  1,675,106
  1,828,238
  1,987,789
  2,153,850
  2,326,557
  2,506,087
  2,692,663
  2,886,547
  3,088,042
Maintenance CAPEX, $m
  -3,154
  -4,641
  -6,631
  -9,224
  -12,516
  -16,598
  -21,555
  -27,455
  -34,356
  -42,300
  -51,314
  -61,413
  -72,597
  -84,858
  -98,182
  -112,547
  -127,930
  -144,307
  -161,654
  -179,952
  -199,184
  -219,338
  -240,409
  -262,396
  -285,307
  -309,153
  -333,954
  -359,736
  -386,530
  -414,373
New CAPEX, $m
  -14,868
  -19,903
  -25,927
  -32,920
  -40,828
  -49,562
  -59,003
  -69,011
  -79,440
  -90,143
  -100,983
  -111,841
  -122,618
  -133,238
  -143,652
  -153,830
  -163,767
  -173,473
  -182,976
  -192,316
  -201,542
  -210,708
  -219,875
  -229,106
  -238,464
  -248,013
  -257,817
  -267,935
  -278,429
  -289,355
Cash from investing activities, $m
  -18,022
  -24,544
  -32,558
  -42,144
  -53,344
  -66,160
  -80,558
  -96,466
  -113,796
  -132,443
  -152,297
  -173,254
  -195,215
  -218,096
  -241,834
  -266,377
  -291,697
  -317,780
  -344,630
  -372,268
  -400,726
  -430,046
  -460,284
  -491,502
  -523,771
  -557,166
  -591,771
  -627,671
  -664,959
  -703,728
Free cash flow, $m
  12,631
  20,068
  30,238
  43,733
  61,146
  83,044
  109,952
  142,328
  180,548
  224,903
  275,049
  332,185
  395,805
  465,882
  542,336
  625,050
  713,887
  808,700
  909,344
  1,015,688
  1,127,621
  1,245,060
  1,367,955
  1,496,287
  1,630,080
  1,769,390
  1,914,316
  2,064,991
  2,221,589
  2,384,315
Issuance/(repayment) of debt, $m
  4,825
  6,434
  8,382
  10,642
  13,199
  16,022
  19,074
  22,309
  25,681
  29,141
  32,645
  36,155
  39,639
  43,072
  46,439
  49,729
  52,941
  56,079
  59,151
  62,170
  65,153
  68,116
  71,079
  74,064
  77,089
  80,176
  83,345
  86,616
  90,008
  93,540
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  
  4,825
  6,434
  8,382
  10,642
  13,199
  16,022
  19,074
  22,309
  25,681
  29,141
  32,645
  36,155
  39,639
  43,072
  46,439
  49,729
  52,941
  56,079
  59,151
  62,170
  65,153
  68,116
  71,079
  74,064
  77,089
  80,176
  83,345
  86,616
  90,008
  93,540
Total cash flow (excl. dividends), $m
  17,456
  26,502
  38,619
  54,375
  74,344
  99,066
  129,026
  164,637
  206,229
  254,044
  307,694
  368,340
  435,444
  508,954
  588,774
  674,779
  766,829
  864,779
  968,495
  1,077,858
  1,192,774
  1,313,176
  1,439,034
  1,570,351
  1,707,168
  1,849,566
  1,997,661
  2,151,607
  2,311,597
  2,477,855
Retained Cash Flow (-), $m
  -17,103
  -22,946
  -29,890
  -37,952
  -47,069
  -57,138
  -68,022
  -79,560
  -91,583
  -103,922
  -116,419
  -128,937
  -141,361
  -153,605
  -165,610
  -177,344
  -188,799
  -199,989
  -210,945
  -221,713
  -232,348
  -242,916
  -253,484
  -264,126
  -274,915
  -285,924
  -297,226
  -308,891
  -320,988
  -333,584
Prev. year cash balance distribution, $m
  37,951
  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
  3,740
  5,502
  7,861
  10,935
  14,838
  19,678
  25,554
  32,550
  40,731
  50,149
  60,836
  72,809
  86,068
  100,605
  116,402
  133,433
  151,670
  171,086
  191,652
  213,345
  236,146
  260,040
  285,021
  311,088
  338,250
  366,522
  395,925
  426,491
  458,257
  491,266
Cash available for distribution, $m
  38,304
  3,557
  8,729
  16,424
  27,275
  41,928
  61,005
  85,077
  114,646
  150,122
  191,275
  239,403
  294,083
  355,350
  423,164
  497,435
  578,029
  664,790
  757,550
  856,145
  960,425
  1,070,261
  1,185,550
  1,306,225
  1,432,254
  1,563,642
  1,700,435
  1,842,717
  1,990,609
  2,144,271
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
  36,725
  3,256
  7,596
  13,523
  21,142
  30,429
  41,214
  53,175
  65,858
  78,703
  90,833
  102,162
  111,816
  119,297
  124,234
  126,409
  125,770
  122,428
  116,641
  108,790
  99,340
  88,804
  77,702
  66,529
  55,717
  45,619
  36,496
  28,510
  21,729
  16,146
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 Cl A (FB)

Valuation Ratios
P/E Ratio 59.4
Price to Sales 22
Price to Book 10.3
Price to Tangible Book
Price to Cash Flow 37.7
Price to Free Cash Flow 52.3
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 $40653 million for the last fiscal year's total revenue generated by Facebook Cl A. The default revenue input number comes from 2017 income statement of Facebook Cl A. 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 47.1% 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 Cl A, 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 Cl A.
    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 40.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4175 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 Cl A.

Corporate tax rate of 27% is the nominal tax rate for Facebook Cl A. 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 9.2%.

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 77.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Facebook Cl A 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 -1.9%. 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 - $74347 million for Facebook Cl A - 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 2901 million for Facebook Cl A 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 Cl A at the current share price and the inputted number of shares is $609.0 billion.

RELATED COMPANIES Price Int.Val. Rating
MSFT Microsoft 106.27 60.61  sell
GOOGL Alphabet Cl A 1,197.88 989.08  hold
TWTR Twitter 43.42 1.42  str.sell
SINA Sina 83.26 49.11  str.sell
WB Weibo ADR 88.10 99.41  hold
EBAY eBay 34.20 36.69  hold
TWX Time Warner 98.77 106.74  hold

COMPANY NEWS

▶ 3 Things to Watch in the Stock Market This Week   [Jul-22-18 07:10PM  Motley Fool]
▶ [$$] The Next Test for Markets: Tech Earnings   [09:00AM  The Wall Street Journal]
▶ What to Expect When Facebook Reports Earnings   [Jul-21-18 02:46PM  Motley Fool]
▶ Business Highlights   [05:22PM  Associated Press]
▶ Facebook, Inc. Earnings: What to Watch   [02:46PM  Motley Fool]
▶ Facebook reportedly suspends Boston data startup Crimson Hexagon   [02:02PM  American City Business Journals]
▶ How to Hedge a Plunge in the FAANG Stocks   [12:25PM  Investopedia]
▶ Salesforce donation refused by nonprofit helping migrant families   [10:46AM  American City Business Journals]
▶ WhatsApp to limit message forwarding   [Jul-19-18 11:40PM  CNBC]
▶ [$$] Editor's News Picks   [04:51PM  The Wall Street Journal]
▶ 7 Best Tech ETFs to Ride the Earnings Wave   [02:57PM  InvestorPlace]
▶ 4 Artificial Intelligence Stocks to Watch   [09:42AM  InvestorPlace]
▶ [$$] Facebook to Start Taking Down Posts That Could Lead to Violence   [Jul-18-18 10:58PM  The Wall Street Journal]
▶ Should You Buy PayPal Stock? 3 Pros, 3 Cons   [08:30PM  InvestorPlace]
▶ [$$] A Family Reunion, Thanks to Facebook   [08:00PM  The Wall Street Journal]
▶ Facebook says solar deal will power Prineville data centers   [03:14PM  American City Business Journals]
▶ Instagram's Musical Opportunity   [10:00AM  Motley Fool]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.