Intrinsic value of Alphabet Cl C - GOOG

Previous Close

$968.45

  Intrinsic Value

$910.72

stock screener

  Rating & Target

hold

-6%

Previous close

$968.45

 
Intrinsic value

$910.72

 
Up/down potential

-6%

 
Rating

hold

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

We calculate the intrinsic value of GOOG 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 2016), $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 676.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  20.38
  21.00
  19.40
  17.96
  16.66
  15.50
  14.45
  13.50
  12.65
  11.89
  11.20
  10.58
  10.02
  9.52
  9.07
  8.66
  8.29
  7.96
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.03
  5.93
  5.84
  5.75
Revenue, $m
  90,272
  109,229
  130,420
  153,843
  179,479
  207,294
  237,244
  269,279
  303,350
  339,411
  377,421
  417,347
  459,170
  502,877
  548,473
  595,973
  645,404
  696,809
  750,243
  805,773
  863,477
  923,447
  985,786
  1,050,608
  1,118,037
  1,188,208
  1,261,266
  1,337,368
  1,416,680
  1,499,376
  1,585,645
Variable operating expenses, $m
 
  77,753
  92,518
  108,838
  126,700
  146,081
  166,948
  189,269
  213,008
  238,134
  264,617
  290,790
  319,930
  350,384
  382,153
  415,248
  449,690
  485,507
  522,737
  561,428
  601,634
  643,419
  686,854
  732,019
  779,000
  827,893
  878,797
  931,821
  987,082
  1,044,701
  1,104,810
Fixed operating expenses, $m
 
  2,116
  2,168
  2,223
  2,278
  2,335
  2,394
  2,453
  2,515
  2,578
  2,642
  2,708
  2,776
  2,845
  2,916
  2,989
  3,064
  3,141
  3,219
  3,300
  3,382
  3,467
  3,553
  3,642
  3,733
  3,827
  3,922
  4,020
  4,121
  4,224
  4,329
Total operating expenses, $m
  66,556
  79,869
  94,686
  111,061
  128,978
  148,416
  169,342
  191,722
  215,523
  240,712
  267,259
  293,498
  322,706
  353,229
  385,069
  418,237
  452,754
  488,648
  525,956
  564,728
  605,016
  646,886
  690,407
  735,661
  782,733
  831,720
  882,719
  935,841
  991,203
  1,048,925
  1,109,139
Operating income, $m
  23,716
  29,361
  35,733
  42,782
  50,501
  58,878
  67,902
  77,557
  87,827
  98,699
  110,161
  123,849
  136,464
  149,649
  163,404
  177,735
  192,650
  208,162
  224,287
  241,045
  258,461
  276,562
  295,379
  314,947
  335,303
  356,489
  378,548
  401,527
  425,477
  450,451
  476,506
EBITDA, $m
  29,860
  36,079
  43,435
  51,572
  60,480
  70,150
  80,564
  91,706
  103,558
  116,105
  129,331
  143,226
  157,783
  172,997
  188,869
  205,405
  222,615
  240,514
  259,119
  278,456
  298,551
  319,436
  341,148
  363,725
  387,212
  411,656
  437,106
  463,619
  491,251
  520,065
  550,125
Interest expense (income), $m
  84
  138
  347
  581
  840
  1,123
  1,430
  1,760
  2,114
  2,490
  2,888
  3,307
  3,748
  4,210
  4,692
  5,195
  5,720
  6,265
  6,833
  7,423
  8,035
  8,672
  9,334
  10,022
  10,738
  11,482
  12,257
  13,063
  13,903
  14,779
  15,691
Earnings before tax, $m
  24,150
  29,223
  35,386
  42,201
  49,661
  57,756
  66,472
  75,796
  85,713
  96,210
  107,273
  120,542
  132,716
  145,439
  158,712
  172,540
  186,930
  201,896
  217,454
  233,622
  250,425
  267,890
  286,045
  304,925
  324,565
  345,007
  366,291
  388,464
  411,574
  435,673
  460,814
Tax expense, $m
  4,672
  7,890
  9,554
  11,394
  13,408
  15,594
  17,948
  20,465
  23,143
  25,977
  28,964
  32,546
  35,833
  39,268
  42,852
  46,586
  50,471
  54,512
  58,713
  63,078
  67,615
  72,330
  77,232
  82,330
  87,633
  93,152
  98,899
  104,885
  111,125
  117,632
  124,420
Net income, $m
  19,478
  21,333
  25,832
  30,807
  36,253
  42,162
  48,525
  55,331
  62,571
  70,233
  78,309
  87,996
  96,883
  106,170
  115,860
  125,954
  136,459
  147,384
  158,741
  170,544
  182,811
  195,559
  208,813
  222,595
  236,933
  251,855
  267,392
  283,579
  300,449
  318,041
  336,395

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  86,390
  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
  167,497
  98,139
  117,178
  138,224
  161,257
  186,248
  213,157
  241,940
  272,552
  304,951
  339,102
  374,975
  412,551
  451,822
  492,788
  535,465
  579,878
  626,064
  674,073
  723,965
  775,810
  829,692
  885,702
  943,943
  1,004,526
  1,067,572
  1,133,213
  1,201,589
  1,272,848
  1,347,149
  1,424,658
Adjusted assets (=assets-cash), $m
  81,107
  98,139
  117,178
  138,224
  161,257
  186,248
  213,157
  241,940
  272,552
  304,951
  339,102
  374,975
  412,551
  451,822
  492,788
  535,465
  579,878
  626,064
  674,073
  723,965
  775,810
  829,692
  885,702
  943,943
  1,004,526
  1,067,572
  1,133,213
  1,201,589
  1,272,848
  1,347,149
  1,424,658
Revenue / Adjusted assets
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
  1.113
Average production assets, $m
  35,202
  42,599
  50,864
  59,999
  69,997
  80,845
  92,525
  105,019
  118,307
  132,370
  147,194
  162,765
  179,076
  196,122
  213,905
  232,429
  251,708
  271,756
  292,595
  314,251
  336,756
  360,144
  384,457
  409,737
  436,034
  463,401
  491,894
  521,574
  552,505
  584,757
  618,401
Working capital, $m
  88,652
  2,731
  3,260
  3,846
  4,487
  5,182
  5,931
  6,732
  7,584
  8,485
  9,436
  10,434
  11,479
  12,572
  13,712
  14,899
  16,135
  17,420
  18,756
  20,144
  21,587
  23,086
  24,645
  26,265
  27,951
  29,705
  31,532
  33,434
  35,417
  37,484
  39,641
Total debt, $m
  3,935
  9,921
  16,604
  23,991
  32,075
  40,847
  50,292
  60,395
  71,140
  82,512
  94,499
  107,090
  120,280
  134,063
  148,443
  163,422
  179,011
  195,223
  212,074
  229,586
  247,783
  266,696
  286,355
  306,798
  328,062
  350,192
  373,232
  397,232
  422,244
  448,323
  475,529
Total liabilities, $m
  28,461
  34,447
  41,130
  48,517
  56,601
  65,373
  74,818
  84,921
  95,666
  107,038
  119,025
  131,616
  144,806
  158,589
  172,969
  187,948
  203,537
  219,749
  236,600
  254,112
  272,309
  291,222
  310,881
  331,324
  352,588
  374,718
  397,758
  421,758
  446,770
  472,849
  500,055
Total equity, $m
  139,036
  63,692
  76,049
  89,707
  104,656
  120,875
  138,339
  157,019
  176,886
  197,913
  220,077
  243,359
  267,746
  293,232
  319,820
  347,517
  376,341
  406,316
  437,473
  469,853
  503,501
  538,470
  574,821
  612,619
  651,937
  692,854
  735,455
  779,831
  826,078
  874,299
  924,603
Total liabilities and equity, $m
  167,497
  98,139
  117,179
  138,224
  161,257
  186,248
  213,157
  241,940
  272,552
  304,951
  339,102
  374,975
  412,552
  451,821
  492,789
  535,465
  579,878
  626,065
  674,073
  723,965
  775,810
  829,692
  885,702
  943,943
  1,004,525
  1,067,572
  1,133,213
  1,201,589
  1,272,848
  1,347,148
  1,424,658
Debt-to-equity ratio
  0.028
  0.160
  0.220
  0.270
  0.310
  0.340
  0.360
  0.380
  0.400
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.480
  0.480
  0.480
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
Adjusted equity ratio
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649
  0.649

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  19,478
  21,333
  25,832
  30,807
  36,253
  42,162
  48,525
  55,331
  62,571
  70,233
  78,309
  87,996
  96,883
  106,170
  115,860
  125,954
  136,459
  147,384
  158,741
  170,544
  182,811
  195,559
  208,813
  222,595
  236,933
  251,855
  267,392
  283,579
  300,449
  318,041
  336,395
Depreciation, amort., depletion, $m
  6,144
  6,718
  7,702
  8,790
  9,980
  11,271
  12,662
  14,149
  15,731
  17,405
  19,170
  19,377
  21,319
  23,348
  25,465
  27,670
  29,965
  32,352
  34,833
  37,411
  40,090
  42,874
  45,769
  48,778
  51,909
  55,167
  58,559
  62,092
  65,774
  69,614
  73,619
Funds from operations, $m
  39,336
  28,051
  33,534
  39,596
  46,232
  53,433
  61,187
  69,480
  78,302
  87,638
  97,479
  107,372
  118,201
  129,518
  141,324
  153,624
  166,424
  179,736
  193,574
  207,955
  222,901
  238,434
  254,581
  271,373
  288,842
  307,022
  325,951
  345,671
  366,223
  387,655
  410,014
Change in working capital, $m
  3,300
  474
  530
  586
  641
  695
  749
  801
  852
  902
  950
  998
  1,046
  1,093
  1,140
  1,187
  1,236
  1,285
  1,336
  1,388
  1,443
  1,499
  1,558
  1,621
  1,686
  1,754
  1,826
  1,903
  1,983
  2,067
  2,157
Cash from operations, $m
  36,036
  27,577
  33,004
  39,011
  45,591
  52,738
  60,438
  68,680
  77,450
  86,737
  96,529
  106,374
  117,156
  128,426
  140,185
  152,437
  165,188
  178,451
  192,238
  206,567
  221,458
  236,934
  253,023
  269,753
  287,156
  305,267
  324,125
  343,768
  364,241
  385,587
  407,857
Maintenance CAPEX, $m
  0
  -4,191
  -5,071
  -6,055
  -7,143
  -8,333
  -9,624
  -11,015
  -12,502
  -14,084
  -15,758
  -17,523
  -19,377
  -21,319
  -23,348
  -25,465
  -27,670
  -29,965
  -32,352
  -34,833
  -37,411
  -40,090
  -42,874
  -45,769
  -48,778
  -51,909
  -55,167
  -58,559
  -62,092
  -65,774
  -69,614
New CAPEX, $m
  -10,212
  -7,397
  -8,264
  -9,135
  -9,998
  -10,848
  -11,680
  -12,494
  -13,288
  -14,064
  -14,824
  -15,571
  -16,311
  -17,046
  -17,782
  -18,525
  -19,278
  -20,048
  -20,839
  -21,656
  -22,505
  -23,388
  -24,312
  -25,280
  -26,297
  -27,367
  -28,493
  -29,680
  -30,931
  -32,252
  -33,645
Cash from investing activities, $m
  -31,165
  -11,588
  -13,335
  -15,190
  -17,141
  -19,181
  -21,304
  -23,509
  -25,790
  -28,148
  -30,582
  -33,094
  -35,688
  -38,365
  -41,130
  -43,990
  -46,948
  -50,013
  -53,191
  -56,489
  -59,916
  -63,478
  -67,186
  -71,049
  -75,075
  -79,276
  -83,660
  -88,239
  -93,023
  -98,026
  -103,259
Free cash flow, $m
  4,871
  15,989
  19,669
  23,820
  28,451
  33,557
  39,133
  45,171
  51,660
  58,589
  65,947
  73,280
  81,468
  90,061
  99,054
  108,447
  118,240
  128,438
  139,047
  150,078
  161,542
  173,456
  185,836
  198,704
  212,080
  225,992
  240,465
  255,530
  271,217
  287,561
  304,598
Issuance/(repayment) of debt, $m
  -1,335
  5,986
  6,683
  7,387
  8,085
  8,772
  9,445
  10,103
  10,745
  11,372
  11,987
  12,591
  13,189
  13,784
  14,379
  14,980
  15,589
  16,211
  16,851
  17,512
  18,198
  18,913
  19,660
  20,442
  21,265
  22,129
  23,040
  24,000
  25,012
  26,080
  27,206
Issuance/(repurchase) of shares, $m
  -3,693
  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  
  -8,332
  5,986
  6,683
  7,387
  8,085
  8,772
  9,445
  10,103
  10,745
  11,372
  11,987
  12,591
  13,189
  13,784
  14,379
  14,980
  15,589
  16,211
  16,851
  17,512
  18,198
  18,913
  19,660
  20,442
  21,265
  22,129
  23,040
  24,000
  25,012
  26,080
  27,206
Total cash flow (excl. dividends), $m
  -3,631
  21,975
  26,351
  31,207
  36,535
  42,329
  48,578
  55,274
  62,405
  69,961
  77,934
  85,871
  94,657
  103,845
  113,434
  123,427
  133,829
  144,649
  155,898
  167,590
  179,740
  192,368
  205,496
  219,146
  233,345
  248,121
  263,505
  279,529
  296,229
  313,641
  331,804
Retained Cash Flow (-), $m
  -18,705
  -11,046
  -12,356
  -13,658
  -14,949
  -16,219
  -17,464
  -18,680
  -19,867
  -21,027
  -22,164
  -23,282
  -24,387
  -25,486
  -26,587
  -27,697
  -28,824
  -29,975
  -31,158
  -32,380
  -33,648
  -34,969
  -36,351
  -37,798
  -39,318
  -40,917
  -42,601
  -44,376
  -46,247
  -48,221
  -50,304
Prev. year cash balance distribution, $m
 
  86,390
  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
 
  97,318
  13,995
  17,549
  21,587
  26,109
  31,114
  36,594
  42,537
  48,934
  55,770
  62,590
  70,270
  78,358
  86,846
  95,729
  105,005
  114,674
  124,740
  135,210
  146,092
  157,399
  169,145
  181,348
  194,027
  207,204
  220,904
  235,154
  249,982
  265,420
  281,501
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
 
  93,306
  12,812
  15,272
  17,774
  20,238
  22,581
  24,722
  26,587
  28,110
  29,238
  29,723
  29,987
  29,793
  29,156
  28,104
  26,684
  24,951
  22,972
  20,819
  18,564
  16,280
  14,035
  11,886
  9,882
  8,061
  6,445
  5,047
  3,868
  2,897
  2,120
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

Alphabet Inc. is a holding company. The Company's businesses include Google Inc. (Google) and its Internet products, such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo and X. The Company's segments include Google and Other Bets. The Google segment includes its Internet products, such as Search, Ads, Commerce, Maps, YouTube, Google Cloud, Android, Chrome and Google Play, as well as its hardware initiatives. The Google segment is engaged in advertising, sales of digital content, applications and cloud offerings, and sales of hardware products. The Other Bets segment is engaged in the sales of Internet and television services through Google Fiber, sales of Nest products and services, and licensing and research and development (R&D) services through Verily. It offers Google Assistant, which allows users to type or talk with Google; Google Maps, which helps users navigate to a store, and Google Photos, which helps users store and organize all of their photos.

FINANCIAL RATIOS  of  Alphabet Cl C (GOOG)

Valuation Ratios
P/E Ratio 34.4
Price to Sales 7.4
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 18.6
Price to Free Cash Flow 25.9
Growth Rates
Sales Growth Rate 20.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.6%
Cap. Spend. - 3 Yr. Gr. Rate 6.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 2.8%
Total Debt to Equity 2.8%
Interest Coverage 289
Management Effectiveness
Return On Assets 12.4%
Ret/ On Assets - 3 Yr. Avg. 12%
Return On Total Capital 14.5%
Ret/ On T. Cap. - 3 Yr. Avg. 14.2%
Return On Equity 15%
Return On Equity - 3 Yr. Avg. 14.8%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 61.1%
Gross Margin - 3 Yr. Avg. 61.7%
EBITDA Margin 33.7%
EBITDA Margin - 3 Yr. Avg. 33.5%
Operating Margin 26.3%
Oper. Margin - 3 Yr. Avg. 25.7%
Pre-Tax Margin 26.8%
Pre-Tax Margin - 3 Yr. Avg. 26.4%
Net Profit Margin 21.6%
Net Profit Margin - 3 Yr. Avg. 21.6%
Effective Tax Rate 19.3%
Eff/ Tax Rate - 3 Yr. Avg. 19.1%
Payout Ratio 0%

GOOG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GOOG stock intrinsic value calculation we used $90272 million for the last fiscal year's total revenue generated by Alphabet Cl C. The default revenue input number comes from 2016 income statement of Alphabet Cl C. 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 GOOG stock valuation model: a) initial revenue growth rate of 21% 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 GOOG is calculated based on our internal credit rating of Alphabet Cl C, 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 Alphabet Cl C.
    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 GOOG stock the variable cost ratio is equal to 71.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2064 million in the base year in the intrinsic value calculation for GOOG 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 3.5% for Alphabet Cl C.

Corporate tax rate of 27% is the nominal tax rate for Alphabet Cl C. 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 GOOG 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 GOOG are equal to 39%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Alphabet Cl C 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 GOOG is equal to 2.5%. 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 - $139036 million for Alphabet Cl C - 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 698.776 million for Alphabet Cl C 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 Alphabet Cl C at the current share price and the inputted number of shares is $676.7 billion.

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Financial statements of GOOG
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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