Intrinsic value of Alphabet Cl A - GOOGL

Previous Close

$1,197.88

  Intrinsic Value

$989.08

stock screener

  Rating & Target

hold

-17%

Previous close

$1,197.88

 
Intrinsic value

$989.08

 
Up/down potential

-17%

 
Rating

hold

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 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 832.5

 

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, %
  22.80
  21.02
  19.42
  17.98
  16.68
  15.51
  14.46
  13.51
  12.66
  11.90
  11.21
  10.59
  10.03
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
Revenue, $m
  136,130
  164,744
  196,735
  232,100
  270,811
  312,816
  358,048
  406,433
  457,897
  512,369
  569,787
  630,104
  693,286
  759,318
  828,204
  899,967
  974,649
  1,052,315
  1,133,045
  1,216,941
  1,304,124
  1,394,730
  1,488,915
  1,586,850
  1,688,723
  1,794,738
  1,905,116
  2,020,091
  2,139,914
  2,264,851
Variable operating expenses, $m
  99,885
  120,472
  143,487
  168,932
  196,783
  227,004
  259,546
  294,358
  331,384
  370,575
  409,942
  453,337
  498,795
  546,302
  595,863
  647,494
  701,226
  757,103
  815,186
  875,546
  938,271
  1,003,459
  1,071,221
  1,141,682
  1,214,976
  1,291,251
  1,370,663
  1,453,384
  1,539,592
  1,629,480
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
  99,885
  120,472
  143,487
  168,932
  196,783
  227,004
  259,546
  294,358
  331,384
  370,575
  409,942
  453,337
  498,795
  546,302
  595,863
  647,494
  701,226
  757,103
  815,186
  875,546
  938,271
  1,003,459
  1,071,221
  1,141,682
  1,214,976
  1,291,251
  1,370,663
  1,453,384
  1,539,592
  1,629,480
Operating income, $m
  36,245
  44,273
  53,247
  63,168
  74,028
  85,812
  98,501
  112,075
  126,512
  141,794
  159,846
  176,767
  194,491
  213,016
  232,341
  252,473
  273,424
  295,212
  317,859
  341,395
  365,853
  391,271
  417,693
  445,168
  473,747
  503,488
  534,453
  566,707
  600,322
  635,371
EBITDA, $m
  45,295
  54,816
  65,461
  77,228
  90,108
  104,085
  119,135
  135,235
  152,359
  170,483
  189,588
  209,658
  230,681
  252,652
  275,573
  299,451
  324,300
  350,142
  377,004
  404,920
  433,928
  464,076
  495,415
  528,001
  561,898
  597,173
  633,900
  672,156
  712,025
  753,596
Interest expense (income), $m
  84
  214
  769
  1,394
  2,093
  2,866
  3,711
  4,629
  5,617
  6,674
  7,798
  8,988
  10,242
  11,560
  12,940
  14,383
  15,887
  17,455
  19,086
  20,783
  22,546
  24,379
  26,284
  28,263
  30,320
  32,460
  34,685
  37,001
  39,412
  41,924
  44,541
Earnings before tax, $m
  36,031
  43,504
  51,853
  61,075
  71,163
  82,101
  93,872
  106,458
  119,839
  133,996
  150,858
  166,524
  182,931
  200,076
  217,958
  236,585
  255,969
  276,125
  297,076
  318,849
  341,474
  364,988
  389,431
  414,847
  441,287
  468,803
  497,452
  527,295
  558,398
  590,830
Tax expense, $m
  9,728
  11,746
  14,000
  16,490
  19,214
  22,167
  25,346
  28,744
  32,356
  36,179
  40,732
  44,962
  49,391
  54,020
  58,849
  63,878
  69,112
  74,554
  80,211
  86,089
  92,198
  98,547
  105,146
  112,009
  119,147
  126,577
  134,312
  142,370
  150,768
  159,524
Net income, $m
  26,303
  31,758
  37,853
  44,585
  51,949
  59,934
  68,527
  77,714
  87,482
  97,817
  110,126
  121,563
  133,540
  146,055
  159,109
  172,707
  186,857
  201,571
  216,866
  232,760
  249,276
  266,441
  284,284
  302,839
  322,140
  342,226
  363,140
  384,925
  407,631
  431,306

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
  146,850
  177,718
  212,227
  250,377
  292,137
  337,449
  386,243
  438,439
  493,956
  552,717
  614,657
  679,724
  747,881
  819,113
  893,424
  970,838
  1,051,402
  1,135,183
  1,222,271
  1,312,774
  1,406,822
  1,504,563
  1,606,165
  1,711,812
  1,821,707
  1,936,072
  2,055,141
  2,179,171
  2,308,429
  2,443,205
Adjusted assets (=assets-cash), $m
  146,850
  177,718
  212,227
  250,377
  292,137
  337,449
  386,243
  438,439
  493,956
  552,717
  614,657
  679,724
  747,881
  819,113
  893,424
  970,838
  1,051,402
  1,135,183
  1,222,271
  1,312,774
  1,406,822
  1,504,563
  1,606,165
  1,711,812
  1,821,707
  1,936,072
  2,055,141
  2,179,171
  2,308,429
  2,443,205
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
  71,060
  85,997
  102,695
  121,156
  141,363
  163,290
  186,901
  212,158
  239,022
  267,456
  297,429
  328,914
  361,895
  396,364
  432,323
  469,783
  508,767
  549,308
  591,449
  635,243
  680,753
  728,049
  777,213
  828,335
  881,513
  936,853
  994,471
  1,054,488
  1,117,035
  1,182,252
Working capital, $m
  -2,995
  -3,624
  -4,328
  -5,106
  -5,958
  -6,882
  -7,877
  -8,942
  -10,074
  -11,272
  -12,535
  -13,862
  -15,252
  -16,705
  -18,220
  -19,799
  -21,442
  -23,151
  -24,927
  -26,773
  -28,691
  -30,684
  -32,756
  -34,911
  -37,152
  -39,484
  -41,913
  -44,442
  -47,078
  -49,827
Total debt, $m
  14,245
  25,820
  38,761
  53,068
  68,727
  85,720
  104,017
  123,591
  144,409
  166,445
  189,672
  214,072
  239,632
  266,344
  294,210
  323,240
  353,452
  384,870
  417,528
  451,466
  486,734
  523,387
  561,488
  601,105
  642,316
  685,203
  729,854
  776,365
  824,837
  875,378
Total liabilities, $m
  55,069
  66,644
  79,585
  93,892
  109,551
  126,544
  144,841
  164,415
  185,233
  207,269
  230,496
  254,896
  280,456
  307,168
  335,034
  364,064
  394,276
  425,694
  458,352
  492,290
  527,558
  564,211
  602,312
  641,929
  683,140
  726,027
  770,678
  817,189
  865,661
  916,202
Total equity, $m
  91,781
  111,074
  132,642
  156,486
  182,586
  210,906
  241,402
  274,024
  308,722
  345,448
  384,161
  424,827
  467,426
  511,946
  558,390
  606,774
  657,126
  709,489
  763,919
  820,484
  879,264
  940,352
  1,003,853
  1,069,882
  1,138,567
  1,210,045
  1,284,463
  1,361,982
  1,442,768
  1,527,003
Total liabilities and equity, $m
  146,850
  177,718
  212,227
  250,378
  292,137
  337,450
  386,243
  438,439
  493,955
  552,717
  614,657
  679,723
  747,882
  819,114
  893,424
  970,838
  1,051,402
  1,135,183
  1,222,271
  1,312,774
  1,406,822
  1,504,563
  1,606,165
  1,711,811
  1,821,707
  1,936,072
  2,055,141
  2,179,171
  2,308,429
  2,443,205
Debt-to-equity ratio
  0.160
  0.230
  0.290
  0.340
  0.380
  0.410
  0.430
  0.450
  0.470
  0.480
  0.490
  0.500
  0.510
  0.520
  0.530
  0.530
  0.540
  0.540
  0.550
  0.550
  0.550
  0.560
  0.560
  0.560
  0.560
  0.570
  0.570
  0.570
  0.570
  0.570
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
  26,303
  31,758
  37,853
  44,585
  51,949
  59,934
  68,527
  77,714
  87,482
  97,817
  110,126
  121,563
  133,540
  146,055
  159,109
  172,707
  186,857
  201,571
  216,866
  232,760
  249,276
  266,441
  284,284
  302,839
  322,140
  342,226
  363,140
  384,925
  407,631
  431,306
Depreciation, amort., depletion, $m
  9,050
  10,544
  12,213
  14,060
  16,080
  18,273
  20,634
  23,160
  25,846
  28,690
  29,743
  32,891
  36,190
  39,636
  43,232
  46,978
  50,877
  54,931
  59,145
  63,524
  68,075
  72,805
  77,721
  82,834
  88,151
  93,685
  99,447
  105,449
  111,704
  118,225
Funds from operations, $m
  35,353
  42,301
  50,066
  58,644
  68,029
  78,206
  89,161
  100,874
  113,328
  126,506
  139,869
  154,454
  169,729
  185,692
  202,342
  219,686
  237,734
  256,502
  276,011
  296,284
  317,351
  339,246
  362,006
  385,672
  410,291
  435,911
  462,587
  490,374
  519,334
  549,531
Change in working capital, $m
  -556
  -630
  -704
  -778
  -852
  -924
  -995
  -1,064
  -1,132
  -1,198
  -1,263
  -1,327
  -1,390
  -1,453
  -1,515
  -1,579
  -1,643
  -1,709
  -1,776
  -1,846
  -1,918
  -1,993
  -2,072
  -2,155
  -2,241
  -2,332
  -2,428
  -2,529
  -2,636
  -2,749
Cash from operations, $m
  35,909
  42,931
  50,770
  59,423
  68,881
  79,131
  90,156
  101,939
  114,460
  127,705
  141,132
  155,781
  171,119
  187,144
  203,857
  221,264
  239,377
  258,211
  277,787
  298,130
  319,269
  341,239
  364,078
  387,827
  412,532
  438,244
  465,015
  492,904
  521,970
  552,280
Maintenance CAPEX, $m
  -5,792
  -7,106
  -8,600
  -10,270
  -12,116
  -14,136
  -16,329
  -18,690
  -21,216
  -23,902
  -26,746
  -29,743
  -32,891
  -36,190
  -39,636
  -43,232
  -46,978
  -50,877
  -54,931
  -59,145
  -63,524
  -68,075
  -72,805
  -77,721
  -82,834
  -88,151
  -93,685
  -99,447
  -105,449
  -111,704
New CAPEX, $m
  -13,144
  -14,937
  -16,699
  -18,461
  -20,207
  -21,926
  -23,611
  -25,257
  -26,864
  -28,434
  -29,972
  -31,485
  -32,981
  -34,469
  -35,958
  -37,460
  -38,984
  -40,541
  -42,141
  -43,794
  -45,509
  -47,296
  -49,164
  -51,122
  -53,178
  -55,340
  -57,617
  -60,017
  -62,548
  -65,217
Cash from investing activities, $m
  -18,936
  -22,043
  -25,299
  -28,731
  -32,323
  -36,062
  -39,940
  -43,947
  -48,080
  -52,336
  -56,718
  -61,228
  -65,872
  -70,659
  -75,594
  -80,692
  -85,962
  -91,418
  -97,072
  -102,939
  -109,033
  -115,371
  -121,969
  -128,843
  -136,012
  -143,491
  -151,302
  -159,464
  -167,997
  -176,921
Free cash flow, $m
  16,973
  20,888
  25,471
  30,692
  36,558
  43,068
  50,216
  57,991
  66,381
  75,368
  84,414
  94,553
  105,247
  116,486
  128,262
  140,572
  153,414
  166,793
  180,715
  195,191
  210,236
  225,868
  242,108
  258,983
  276,521
  294,752
  313,713
  333,440
  353,974
  375,359
Issuance/(repayment) of debt, $m
  10,276
  11,575
  12,941
  14,306
  15,660
  16,992
  18,298
  19,573
  20,819
  22,036
  23,228
  24,400
  25,559
  26,712
  27,866
  29,030
  30,211
  31,418
  32,658
  33,939
  35,268
  36,653
  38,101
  39,618
  41,211
  42,887
  44,651
  46,511
  48,472
  50,541
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  
  10,276
  11,575
  12,941
  14,306
  15,660
  16,992
  18,298
  19,573
  20,819
  22,036
  23,228
  24,400
  25,559
  26,712
  27,866
  29,030
  30,211
  31,418
  32,658
  33,939
  35,268
  36,653
  38,101
  39,618
  41,211
  42,887
  44,651
  46,511
  48,472
  50,541
Total cash flow (excl. dividends), $m
  27,248
  32,463
  38,412
  44,999
  52,218
  60,060
  68,514
  77,565
  87,199
  97,404
  107,642
  118,953
  130,806
  143,198
  156,129
  169,602
  183,626
  198,211
  213,373
  229,130
  245,504
  262,521
  280,209
  298,601
  317,732
  337,639
  358,364
  379,951
  402,446
  425,900
Retained Cash Flow (-), $m
  -16,967
  -19,292
  -21,568
  -23,844
  -26,100
  -28,320
  -30,496
  -32,622
  -34,698
  -36,726
  -38,713
  -40,667
  -42,598
  -44,520
  -46,444
  -48,384
  -50,352
  -52,363
  -54,430
  -56,565
  -58,780
  -61,088
  -63,501
  -66,029
  -68,685
  -71,478
  -74,419
  -77,518
  -80,787
  -84,235
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
  7,649
  9,393
  11,367
  13,575
  16,015
  18,686
  21,584
  24,705
  28,044
  31,595
  35,353
  39,315
  43,477
  47,837
  52,393
  57,146
  62,098
  67,251
  72,610
  78,180
  83,969
  89,985
  96,236
  102,735
  109,493
  116,522
  123,837
  131,453
  139,386
  147,654
Cash available for distribution, $m
  87,969
  13,171
  16,844
  21,155
  26,118
  31,740
  38,017
  44,942
  52,501
  60,678
  68,929
  78,286
  88,208
  98,678
  109,685
  121,218
  133,273
  145,848
  158,943
  172,565
  186,724
  201,432
  216,708
  232,572
  249,047
  266,161
  283,945
  302,432
  321,659
  341,665
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
  84,342
  12,058
  14,659
  17,419
  20,245
  23,035
  25,684
  28,090
  30,159
  31,811
  32,733
  33,408
  33,538
  33,128
  32,202
  30,804
  28,998
  26,859
  24,473
  21,928
  19,313
  16,714
  14,203
  11,845
  9,688
  7,765
  6,094
  4,679
  3,511
  2,573
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 42.5
Price to Sales 9.2
Price to Book 6
Price to Tangible Book
Price to Cash Flow 23
Price to Free Cash Flow 32.1
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 2017 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 22.8% 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 6.9%.

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 52.2%.

Life of production assets of 10 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 -2.2%. 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 - $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 695 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 $832.5 billion.

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COMPANY NEWS

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▶ [$$] Google Is Fined $5 Billion by EU in Android Antitrust Case   [Jul-18-18 11:45PM  The Wall Street Journal]
▶ [$$] Googles Grip on Search Is Secure, but Getting Pricier   [08:01PM  The Wall Street Journal]
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