Intrinsic value of Alphabet Cl A - GOOGL

Previous Close

$1,049.36

  Intrinsic Value

$2,739

stock screener

  Rating & Target

str. buy

+161%

Previous close

$1,049.36

 
Intrinsic value

$2,739

 
Up/down potential

+161%

 
Rating

str. buy

We calculate the intrinsic value of GOOGL 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 313.4

 

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, %
  25.60
  23.54
  21.69
  20.02
  18.52
  17.16
  15.95
  14.85
  13.87
  12.98
  12.18
  11.46
  10.82
  10.24
  9.71
  9.24
  8.82
  8.44
  8.09
  7.78
  7.50
  7.25
  7.03
  6.83
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
Revenue, $m
  139,234
  172,010
  209,312
  251,210
  297,723
  348,825
  404,455
  464,528
  528,947
  597,609
  670,414
  747,274
  828,114
  912,882
  1,001,546
  1,094,103
  1,190,572
  1,291,003
  1,395,471
  1,504,077
  1,616,950
  1,734,244
  1,856,137
  1,982,833
  2,114,556
  2,251,556
  2,394,101
  2,542,485
  2,697,019
  2,858,039
Variable operating expenses, $m
  102,118
  125,699
  152,536
  182,681
  216,145
  252,911
  292,935
  336,155
  382,502
  431,902
  482,339
  537,637
  595,799
  656,786
  720,577
  787,168
  856,575
  928,831
  1,003,991
  1,082,130
  1,163,338
  1,247,727
  1,335,425
  1,426,578
  1,521,348
  1,619,914
  1,722,471
  1,829,227
  1,940,410
  2,056,258
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
  102,118
  125,699
  152,536
  182,681
  216,145
  252,911
  292,935
  336,155
  382,502
  431,902
  482,339
  537,637
  595,799
  656,786
  720,577
  787,168
  856,575
  928,831
  1,003,991
  1,082,130
  1,163,338
  1,247,727
  1,335,425
  1,426,578
  1,521,348
  1,619,914
  1,722,471
  1,829,227
  1,940,410
  2,056,258
Operating income, $m
  37,116
  46,311
  56,775
  68,529
  81,578
  95,914
  111,520
  128,373
  146,444
  165,707
  188,075
  209,637
  232,315
  256,096
  280,969
  306,935
  333,998
  362,172
  391,479
  421,947
  453,612
  486,517
  520,712
  556,255
  593,208
  631,641
  671,630
  713,257
  756,610
  801,782
EBITDA, $m
  46,254
  57,142
  69,534
  83,453
  98,904
  115,880
  134,361
  154,317
  175,717
  198,527
  222,713
  248,246
  275,101
  303,261
  332,716
  363,463
  395,511
  428,874
  463,578
  499,658
  537,154
  576,120
  616,613
  658,701
  702,460
  747,972
  795,326
  844,619
  895,956
  949,447
Interest expense (income), $m
  84
  214
  837
  1,553
  2,368
  3,283
  4,299
  5,415
  6,631
  7,943
  9,350
  10,850
  12,440
  14,119
  15,885
  17,737
  19,674
  21,696
  23,803
  25,997
  28,279
  30,652
  33,117
  35,679
  38,342
  41,110
  43,987
  46,980
  50,094
  53,335
  56,711
Earnings before tax, $m
  36,902
  45,474
  55,222
  66,162
  78,295
  91,615
  106,104
  121,742
  138,502
  156,356
  177,225
  197,196
  218,196
  240,210
  263,232
  287,261
  312,302
  338,369
  365,482
  393,668
  422,960
  453,400
  485,033
  517,913
  552,098
  587,654
  624,650
  663,163
  703,275
  745,071
Tax expense, $m
  9,963
  12,278
  14,910
  17,864
  21,140
  24,736
  28,648
  32,870
  37,395
  42,216
  47,851
  53,243
  58,913
  64,857
  71,073
  77,560
  84,322
  91,360
  98,680
  106,290
  114,199
  122,418
  130,959
  139,836
  149,067
  158,667
  168,656
  179,054
  189,884
  201,169
Net income, $m
  26,938
  33,196
  40,312
  48,298
  57,155
  66,879
  77,456
  88,872
  101,106
  114,140
  129,374
  143,953
  159,283
  175,354
  192,160
  209,700
  227,981
  247,009
  266,802
  287,378
  308,761
  330,982
  354,074
  378,076
  403,032
  428,987
  455,995
  484,109
  513,390
  543,901

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
  150,198
  185,555
  225,795
  270,993
  321,169
  376,295
  436,305
  501,109
  570,601
  644,670
  723,208
  806,120
  893,327
  984,770
  1,080,417
  1,180,262
  1,284,328
  1,392,668
  1,505,362
  1,622,521
  1,744,282
  1,870,813
  2,002,306
  2,138,978
  2,281,075
  2,428,862
  2,582,633
  2,742,702
  2,909,406
  3,083,106
Adjusted assets (=assets-cash), $m
  150,198
  185,555
  225,795
  270,993
  321,169
  376,295
  436,305
  501,109
  570,601
  644,670
  723,208
  806,120
  893,327
  984,770
  1,080,417
  1,180,262
  1,284,328
  1,392,668
  1,505,362
  1,622,521
  1,744,282
  1,870,813
  2,002,306
  2,138,978
  2,281,075
  2,428,862
  2,582,633
  2,742,702
  2,909,406
  3,083,106
Revenue / Adjusted assets
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
Average production assets, $m
  60,428
  74,652
  90,841
  109,025
  129,212
  151,390
  175,533
  201,605
  229,563
  259,362
  290,960
  324,317
  359,401
  396,191
  434,671
  474,841
  516,708
  560,295
  605,634
  652,769
  701,756
  752,662
  805,564
  860,549
  917,717
  977,175
  1,039,040
  1,103,438
  1,170,506
  1,240,389
Working capital, $m
  -2,228
  -2,752
  -3,349
  -4,019
  -4,764
  -5,581
  -6,471
  -7,432
  -8,463
  -9,562
  -10,727
  -11,956
  -13,250
  -14,606
  -16,025
  -17,506
  -19,049
  -20,656
  -22,328
  -24,065
  -25,871
  -27,748
  -29,698
  -31,725
  -33,833
  -36,025
  -38,306
  -40,680
  -43,152
  -45,729
Total debt, $m
  15,500
  28,759
  43,849
  60,798
  79,614
  100,286
  122,790
  147,092
  173,151
  200,927
  230,379
  261,471
  294,174
  328,465
  364,332
  401,774
  440,799
  481,426
  523,687
  567,621
  613,282
  660,731
  710,041
  761,293
  814,579
  869,999
  927,664
  987,689
  1,050,203
  1,115,341
Total liabilities, $m
  56,324
  69,583
  84,673
  101,622
  120,438
  141,110
  163,614
  187,916
  213,975
  241,751
  271,203
  302,295
  334,998
  369,289
  405,156
  442,598
  481,623
  522,250
  564,511
  608,445
  654,106
  701,555
  750,865
  802,117
  855,403
  910,823
  968,488
  1,028,513
  1,091,027
  1,156,165
Total equity, $m
  93,874
  115,972
  141,122
  169,370
  200,731
  235,184
  272,690
  313,193
  356,625
  402,918
  452,005
  503,825
  558,329
  615,481
  675,261
  737,664
  802,705
  870,417
  940,851
  1,014,075
  1,090,176
  1,169,258
  1,251,441
  1,336,861
  1,425,672
  1,518,039
  1,614,146
  1,714,189
  1,818,379
  1,926,941
Total liabilities and equity, $m
  150,198
  185,555
  225,795
  270,992
  321,169
  376,294
  436,304
  501,109
  570,600
  644,669
  723,208
  806,120
  893,327
  984,770
  1,080,417
  1,180,262
  1,284,328
  1,392,667
  1,505,362
  1,622,520
  1,744,282
  1,870,813
  2,002,306
  2,138,978
  2,281,075
  2,428,862
  2,582,634
  2,742,702
  2,909,406
  3,083,106
Debt-to-equity ratio
  0.170
  0.250
  0.310
  0.360
  0.400
  0.430
  0.450
  0.470
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.560
  0.560
  0.560
  0.570
  0.570
  0.570
  0.570
  0.570
  0.570
  0.580
  0.580
  0.580
Adjusted equity ratio
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  26,938
  33,196
  40,312
  48,298
  57,155
  66,879
  77,456
  88,872
  101,106
  114,140
  129,374
  143,953
  159,283
  175,354
  192,160
  209,700
  227,981
  247,009
  266,802
  287,378
  308,761
  330,982
  354,074
  378,076
  403,032
  428,987
  455,995
  484,109
  513,390
  543,901
Depreciation, amort., depletion, $m
  9,138
  10,831
  12,758
  14,923
  17,326
  19,967
  22,841
  25,945
  29,273
  32,820
  34,638
  38,609
  42,786
  47,166
  51,747
  56,529
  61,513
  66,702
  72,099
  77,711
  83,542
  89,603
  95,900
  102,446
  109,252
  116,330
  123,695
  131,362
  139,346
  147,665
Funds from operations, $m
  36,076
  44,027
  53,071
  63,221
  74,482
  86,845
  100,297
  114,816
  130,379
  146,961
  164,012
  182,562
  202,069
  222,519
  243,906
  266,229
  289,493
  313,711
  338,901
  365,088
  392,303
  420,584
  449,974
  480,523
  512,284
  545,318
  579,690
  615,471
  652,736
  691,567
Change in working capital, $m
  -454
  -524
  -597
  -670
  -744
  -818
  -890
  -961
  -1,031
  -1,099
  -1,165
  -1,230
  -1,293
  -1,356
  -1,419
  -1,481
  -1,544
  -1,607
  -1,671
  -1,738
  -1,806
  -1,877
  -1,950
  -2,027
  -2,108
  -2,192
  -2,281
  -2,374
  -2,473
  -2,576
Cash from operations, $m
  36,530
  44,551
  53,668
  63,891
  75,226
  87,663
  101,187
  115,777
  131,410
  148,059
  165,177
  183,792
  203,362
  223,875
  245,325
  267,710
  291,037
  315,318
  340,573
  366,826
  394,109
  422,461
  451,925
  482,550
  514,391
  547,510
  581,971
  617,845
  655,209
  694,143
Maintenance CAPEX, $m
  -5,728
  -7,194
  -8,887
  -10,814
  -12,979
  -15,382
  -18,023
  -20,897
  -24,001
  -27,329
  -30,876
  -34,638
  -38,609
  -42,786
  -47,166
  -51,747
  -56,529
  -61,513
  -66,702
  -72,099
  -77,711
  -83,542
  -89,603
  -95,900
  -102,446
  -109,252
  -116,330
  -123,695
  -131,362
  -139,346
New CAPEX, $m
  -12,316
  -14,225
  -16,189
  -18,184
  -20,187
  -22,178
  -24,143
  -26,072
  -27,958
  -29,799
  -31,598
  -33,357
  -35,085
  -36,789
  -38,480
  -40,170
  -41,868
  -43,587
  -45,339
  -47,135
  -48,987
  -50,906
  -52,902
  -54,986
  -57,168
  -59,458
  -61,865
  -64,398
  -67,068
  -69,883
Cash from investing activities, $m
  -18,044
  -21,419
  -25,076
  -28,998
  -33,166
  -37,560
  -42,166
  -46,969
  -51,959
  -57,128
  -62,474
  -67,995
  -73,694
  -79,575
  -85,646
  -91,917
  -98,397
  -105,100
  -112,041
  -119,234
  -126,698
  -134,448
  -142,505
  -150,886
  -159,614
  -168,710
  -178,195
  -188,093
  -198,430
  -209,229
Free cash flow, $m
  18,487
  23,133
  28,591
  34,893
  42,060
  50,102
  59,021
  68,809
  79,451
  90,931
  102,703
  115,797
  129,669
  144,300
  159,679
  175,794
  192,641
  210,218
  228,532
  247,591
  267,412
  288,013
  309,420
  331,664
  354,777
  378,800
  403,776
  429,751
  456,779
  484,915
Issuance/(repayment) of debt, $m
  11,531
  13,259
  15,090
  16,949
  18,816
  20,672
  22,504
  24,301
  26,059
  27,776
  29,452
  31,092
  32,702
  34,291
  35,868
  37,442
  39,025
  40,627
  42,260
  43,934
  45,661
  47,449
  49,310
  51,252
  53,286
  55,420
  57,664
  60,026
  62,514
  65,137
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  
  11,531
  13,259
  15,090
  16,949
  18,816
  20,672
  22,504
  24,301
  26,059
  27,776
  29,452
  31,092
  32,702
  34,291
  35,868
  37,442
  39,025
  40,627
  42,260
  43,934
  45,661
  47,449
  49,310
  51,252
  53,286
  55,420
  57,664
  60,026
  62,514
  65,137
Total cash flow (excl. dividends), $m
  30,018
  36,392
  43,681
  51,842
  60,876
  70,775
  81,525
  93,110
  105,511
  118,707
  132,155
  146,889
  162,371
  178,591
  195,546
  213,236
  231,665
  250,846
  270,792
  291,526
  313,072
  335,462
  358,730
  382,916
  408,063
  434,220
  461,440
  489,777
  519,293
  550,052
Retained Cash Flow (-), $m
  -19,060
  -22,098
  -25,150
  -28,249
  -31,360
  -34,454
  -37,506
  -40,502
  -43,432
  -46,293
  -49,087
  -51,820
  -54,504
  -57,152
  -59,779
  -62,403
  -65,041
  -67,712
  -70,434
  -73,224
  -76,101
  -79,082
  -82,183
  -85,420
  -88,810
  -92,367
  -96,107
  -100,043
  -104,190
  -108,562
Prev. year cash balance distribution, $m
  77,688
  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
  88,646
  14,294
  18,531
  23,593
  29,516
  36,321
  44,019
  52,608
  62,078
  72,414
  83,068
  95,069
  107,867
  121,440
  135,767
  150,833
  166,624
  183,133
  200,359
  218,302
  236,971
  256,380
  276,547
  297,495
  319,253
  341,853
  365,333
  389,734
  415,103
  441,490
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
  84,992
  13,086
  16,127
  19,427
  22,878
  26,360
  29,738
  32,881
  35,661
  37,964
  39,448
  40,569
  41,013
  40,769
  39,859
  38,330
  36,255
  33,726
  30,850
  27,740
  24,511
  21,273
  18,125
  15,152
  12,419
  9,974
  7,841
  6,030
  4,531
  3,324
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

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 A (GOOGL)

Valuation Ratios
P/E Ratio 37.2
Price to Sales 8
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 20.1
Price to Free Cash Flow 28.1
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%

GOOGL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GOOGL stock intrinsic value calculation we used $110855 million for the last fiscal year's total revenue generated by Alphabet Cl A. The default revenue input number comes from 0001 income statement of Alphabet 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 GOOGL stock valuation model: a) initial revenue growth rate of 25.6% 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 GOOGL is calculated based on our internal credit rating of Alphabet 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 Alphabet 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 GOOGL stock the variable cost ratio is equal to 73.7%.

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 GOOGL 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 Alphabet Cl A.

Corporate tax rate of 27% is the nominal tax rate for Alphabet 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 GOOGL 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 GOOGL are equal to 43.4%.

Life of production assets of 8.4 years is the average useful life of capital assets used in Alphabet 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 GOOGL is equal to -1.6%. 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 - $152502 million for Alphabet 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 298.656 million for Alphabet 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 Alphabet Cl A at the current share price and the inputted number of shares is $313.4 billion.

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