Intrinsic value of Alphabet Inc. - GOOGL

Previous Close

$1,138.61

  Intrinsic Value

$1,171

stock screener

  Rating & Target

hold

+3%

Previous close

$1,138.61

 
Intrinsic value

$1,171

 
Up/down potential

+3%

 
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 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 791.5

 

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, %
  21.50
  19.85
  18.37
  17.03
  15.83
  14.74
  13.77
  12.89
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
Revenue, $m
  166,235
  199,233
  235,822
  275,979
  319,654
  366,781
  417,282
  471,078
  528,091
  588,254
  651,510
  717,820
  787,162
  859,534
  934,955
  1,013,465
  1,095,125
  1,180,016
  1,268,241
  1,359,921
  1,455,197
  1,554,229
  1,657,195
  1,764,289
  1,875,724
  1,991,729
  2,112,549
  2,238,445
  2,369,697
  2,506,599
Variable operating expenses, $m
  125,720
  149,490
  175,847
  204,774
  236,235
  270,183
  306,562
  345,314
  386,383
  429,721
  469,316
  517,083
  567,033
  619,167
  673,497
  730,051
  788,875
  850,027
  913,580
  979,621
  1,048,254
  1,119,592
  1,193,763
  1,270,909
  1,351,181
  1,434,745
  1,521,778
  1,612,468
  1,707,016
  1,805,633
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
  125,720
  149,490
  175,847
  204,774
  236,235
  270,183
  306,562
  345,314
  386,383
  429,721
  469,316
  517,083
  567,033
  619,167
  673,497
  730,051
  788,875
  850,027
  913,580
  979,621
  1,048,254
  1,119,592
  1,193,763
  1,270,909
  1,351,181
  1,434,745
  1,521,778
  1,612,468
  1,707,016
  1,805,633
Operating income, $m
  40,515
  49,743
  59,975
  71,205
  83,419
  96,598
  110,720
  125,764
  141,708
  158,532
  182,193
  200,737
  220,128
  240,367
  261,458
  283,414
  306,250
  329,989
  354,661
  380,299
  406,943
  434,637
  463,431
  493,380
  524,543
  556,983
  590,770
  625,977
  662,681
  700,966
EBITDA, $m
  55,971
  67,082
  79,401
  92,922
  107,627
  123,495
  140,499
  158,612
  177,808
  198,065
  219,363
  241,689
  265,037
  289,405
  314,799
  341,233
  368,728
  397,311
  427,016
  457,885
  489,964
  523,308
  557,977
  594,035
  631,555
  670,614
  711,294
  753,683
  797,876
  843,970
Interest expense (income), $m
  84
  217
  864
  1,584
  2,382
  3,258
  4,210
  5,238
  6,340
  7,513
  8,757
  10,069
  11,449
  12,895
  14,408
  15,986
  17,631
  19,344
  21,125
  22,977
  24,901
  26,901
  28,979
  31,139
  33,385
  35,721
  38,152
  40,682
  43,318
  46,064
  48,927
Earnings before tax, $m
  40,299
  48,879
  58,392
  68,823
  80,161
  92,388
  105,482
  119,424
  134,195
  149,775
  172,124
  189,288
  207,233
  225,959
  245,472
  265,782
  286,906
  308,864
  331,684
  355,398
  380,042
  405,658
  432,292
  459,995
  488,821
  518,831
  550,088
  582,659
  616,618
  652,039
Tax expense, $m
  10,881
  13,197
  15,766
  18,582
  21,644
  24,945
  28,480
  32,245
  36,233
  40,439
  46,474
  51,108
  55,953
  61,009
  66,277
  71,761
  77,465
  83,393
  89,555
  95,957
  102,611
  109,528
  116,719
  124,199
  131,982
  140,084
  148,524
  157,318
  166,487
  176,051
Net income, $m
  29,418
  35,682
  42,626
  50,241
  58,518
  67,443
  77,002
  87,180
  97,962
  109,336
  125,651
  138,180
  151,280
  164,950
  179,195
  194,021
  209,441
  225,471
  242,130
  259,441
  277,431
  296,130
  315,573
  335,796
  356,840
  378,747
  401,564
  425,341
  450,131
  475,988

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
  192,402
  230,593
  272,942
  319,420
  369,970
  424,515
  482,966
  545,229
  611,217
  680,849
  754,062
  830,810
  911,067
  994,831
  1,082,124
  1,172,992
  1,267,506
  1,365,759
  1,467,871
  1,573,982
  1,684,256
  1,798,876
  1,918,049
  2,042,001
  2,170,977
  2,305,242
  2,445,079
  2,590,793
  2,742,705
  2,901,156
Adjusted assets (=assets-cash), $m
  192,402
  230,593
  272,942
  319,420
  369,970
  424,515
  482,966
  545,229
  611,217
  680,849
  754,062
  830,810
  911,067
  994,831
  1,082,124
  1,172,992
  1,267,506
  1,365,759
  1,467,871
  1,573,982
  1,684,256
  1,798,876
  1,918,049
  2,042,001
  2,170,977
  2,305,242
  2,445,079
  2,590,793
  2,742,705
  2,901,156
Revenue / Adjusted assets
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
  0.864
Average production assets, $m
  73,975
  88,659
  104,941
  122,811
  142,246
  163,218
  185,691
  209,630
  235,001
  261,773
  289,922
  319,430
  350,287
  382,493
  416,055
  450,992
  487,331
  525,107
  564,367
  605,165
  647,563
  691,632
  737,452
  785,109
  834,697
  886,319
  940,084
  996,108
  1,054,515
  1,115,436
Working capital, $m
  -9,808
  -11,755
  -13,913
  -16,283
  -18,860
  -21,640
  -24,620
  -27,794
  -31,157
  -34,707
  -38,439
  -42,351
  -46,443
  -50,712
  -55,162
  -59,794
  -64,612
  -69,621
  -74,826
  -80,235
  -85,857
  -91,700
  -97,774
  -104,093
  -110,668
  -117,512
  -124,640
  -132,068
  -139,812
  -147,889
Total debt, $m
  15,996
  29,325
  44,105
  60,326
  77,968
  97,004
  117,403
  139,133
  162,163
  186,464
  212,016
  238,801
  266,810
  296,044
  326,509
  358,222
  391,207
  425,498
  461,135
  498,168
  536,653
  576,656
  618,247
  661,506
  706,519
  753,377
  802,181
  853,035
  906,052
  961,351
Total liabilities, $m
  67,148
  80,477
  95,257
  111,478
  129,120
  148,156
  168,555
  190,285
  213,315
  237,616
  263,168
  289,953
  317,962
  347,196
  377,661
  409,374
  442,359
  476,650
  512,287
  549,320
  587,805
  627,808
  669,399
  712,658
  757,671
  804,529
  853,333
  904,187
  957,204
  1,012,503
Total equity, $m
  125,254
  150,116
  177,685
  207,942
  240,851
  276,359
  314,411
  354,944
  397,902
  443,233
  490,894
  540,857
  593,104
  647,635
  704,463
  763,618
  825,146
  889,109
  955,584
  1,024,662
  1,096,450
  1,171,068
  1,248,650
  1,329,343
  1,413,306
  1,500,712
  1,591,747
  1,686,606
  1,785,501
  1,888,652
Total liabilities and equity, $m
  192,402
  230,593
  272,942
  319,420
  369,971
  424,515
  482,966
  545,229
  611,217
  680,849
  754,062
  830,810
  911,066
  994,831
  1,082,124
  1,172,992
  1,267,505
  1,365,759
  1,467,871
  1,573,982
  1,684,255
  1,798,876
  1,918,049
  2,042,001
  2,170,977
  2,305,241
  2,445,080
  2,590,793
  2,742,705
  2,901,155
Debt-to-equity ratio
  0.130
  0.200
  0.250
  0.290
  0.320
  0.350
  0.370
  0.390
  0.410
  0.420
  0.430
  0.440
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.490
  0.490
  0.490
  0.500
  0.500
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
Adjusted equity ratio
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651
  0.651

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  29,418
  35,682
  42,626
  50,241
  58,518
  67,443
  77,002
  87,180
  97,962
  109,336
  125,651
  138,180
  151,280
  164,950
  179,195
  194,021
  209,441
  225,471
  242,130
  259,441
  277,431
  296,130
  315,573
  335,796
  356,840
  378,747
  401,564
  425,341
  450,131
  475,988
Depreciation, amort., depletion, $m
  15,456
  17,338
  19,426
  21,717
  24,209
  26,897
  29,778
  32,848
  36,100
  39,533
  37,169
  40,953
  44,909
  49,038
  53,340
  57,819
  62,478
  67,321
  72,355
  77,585
  83,021
  88,671
  94,545
  100,655
  107,012
  113,631
  120,524
  127,706
  135,194
  143,005
Funds from operations, $m
  44,874
  53,020
  62,052
  71,958
  82,726
  94,340
  106,780
  120,027
  134,062
  148,869
  162,820
  179,133
  196,189
  213,988
  232,535
  251,840
  271,919
  292,792
  314,484
  337,026
  360,452
  384,801
  410,118
  436,451
  463,852
  492,378
  522,088
  553,048
  585,325
  618,993
Change in working capital, $m
  -1,736
  -1,947
  -2,159
  -2,369
  -2,577
  -2,780
  -2,980
  -3,174
  -3,364
  -3,550
  -3,732
  -3,912
  -4,091
  -4,270
  -4,450
  -4,632
  -4,818
  -5,009
  -5,205
  -5,409
  -5,621
  -5,843
  -6,075
  -6,319
  -6,575
  -6,844
  -7,128
  -7,428
  -7,744
  -8,077
Cash from operations, $m
  46,609
  54,967
  64,211
  74,327
  85,303
  97,121
  109,760
  123,201
  137,426
  152,418
  166,552
  183,045
  200,280
  218,258
  236,985
  256,473
  276,737
  297,801
  319,690
  342,435
  366,073
  390,644
  416,193
  442,770
  470,427
  499,222
  529,216
  560,475
  593,069
  627,070
Maintenance CAPEX, $m
  -7,813
  -9,484
  -11,366
  -13,454
  -15,745
  -18,237
  -20,925
  -23,806
  -26,876
  -30,128
  -33,561
  -37,169
  -40,953
  -44,909
  -49,038
  -53,340
  -57,819
  -62,478
  -67,321
  -72,355
  -77,585
  -83,021
  -88,671
  -94,545
  -100,655
  -107,012
  -113,631
  -120,524
  -127,706
  -135,194
New CAPEX, $m
  -13,037
  -14,684
  -16,282
  -17,870
  -19,436
  -20,971
  -22,473
  -23,939
  -25,371
  -26,772
  -28,149
  -29,508
  -30,857
  -32,206
  -33,562
  -34,937
  -36,339
  -37,777
  -39,260
  -40,798
  -42,398
  -44,069
  -45,820
  -47,657
  -49,589
  -51,622
  -53,765
  -56,024
  -58,407
  -60,921
Cash from investing activities, $m
  -20,850
  -24,168
  -27,648
  -31,324
  -35,181
  -39,208
  -43,398
  -47,745
  -52,247
  -56,900
  -61,710
  -66,677
  -71,810
  -77,115
  -82,600
  -88,277
  -94,158
  -100,255
  -106,581
  -113,153
  -119,983
  -127,090
  -134,491
  -142,202
  -150,244
  -158,634
  -167,396
  -176,548
  -186,113
  -196,115
Free cash flow, $m
  25,760
  30,799
  36,562
  43,003
  50,123
  57,912
  66,362
  75,456
  85,180
  95,518
  104,843
  116,368
  128,470
  141,144
  154,385
  168,195
  182,579
  197,546
  213,108
  229,283
  246,090
  263,554
  281,703
  300,568
  320,183
  340,587
  361,821
  383,928
  406,956
  430,955
Issuance/(repayment) of debt, $m
  11,984
  13,329
  14,780
  16,221
  17,642
  19,036
  20,399
  21,730
  23,030
  24,302
  25,551
  26,785
  28,010
  29,234
  30,465
  31,713
  32,985
  34,291
  35,637
  37,033
  38,485
  40,003
  41,591
  43,259
  45,013
  46,858
  48,803
  50,854
  53,017
  55,299
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  
  11,984
  13,329
  14,780
  16,221
  17,642
  19,036
  20,399
  21,730
  23,030
  24,302
  25,551
  26,785
  28,010
  29,234
  30,465
  31,713
  32,985
  34,291
  35,637
  37,033
  38,485
  40,003
  41,591
  43,259
  45,013
  46,858
  48,803
  50,854
  53,017
  55,299
Total cash flow (excl. dividends), $m
  37,744
  44,128
  51,342
  59,224
  67,765
  76,949
  86,761
  97,186
  108,209
  119,819
  130,394
  143,153
  156,480
  170,377
  184,850
  199,908
  215,565
  231,837
  248,745
  266,315
  284,575
  303,556
  323,294
  343,827
  365,196
  387,446
  410,624
  434,782
  459,973
  486,254
Retained Cash Flow (-), $m
  -22,146
  -24,863
  -27,569
  -30,257
  -32,908
  -35,509
  -38,051
  -40,534
  -42,958
  -45,331
  -47,662
  -49,963
  -52,247
  -54,530
  -56,828
  -59,155
  -61,528
  -63,963
  -66,475
  -69,078
  -71,788
  -74,618
  -77,582
  -80,693
  -83,963
  -87,406
  -91,034
  -94,860
  -98,895
  -103,151
Prev. year cash balance distribution, $m
  74,520
  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
  90,119
  19,265
  23,773
  28,967
  34,856
  41,440
  48,709
  56,652
  65,251
  74,489
  82,732
  93,190
  104,233
  115,847
  128,022
  140,753
  154,036
  167,873
  182,270
  197,237
  212,787
  228,938
  245,712
  263,134
  281,233
  300,039
  319,590
  339,922
  361,078
  383,103
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
  86,403
  17,637
  20,689
  23,851
  27,018
  30,075
  32,907
  35,409
  37,483
  39,051
  39,288
  39,768
  39,631
  38,892
  37,585
  35,768
  33,516
  30,916
  28,064
  25,063
  22,009
  18,996
  16,104
  13,402
  10,940
  8,754
  6,859
  5,259
  3,942
  2,885
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 Inc. (GOOGL)

Valuation Ratios
P/E Ratio 40.4
Price to Sales 8.7
Price to Book 5.7
Price to Tangible Book
Price to Cash Flow 21.8
Price to Free Cash Flow 30.5
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 $136819 million for the last fiscal year's total revenue generated by Alphabet Inc.. The default revenue input number comes from 0001 income statement of Alphabet Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GOOGL stock valuation model: a) initial revenue growth rate of 21.5% 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 Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Alphabet Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GOOGL stock the variable cost ratio is equal to 76.4%.

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 Inc..

Corporate tax rate of 27% is the nominal tax rate for Alphabet Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the 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 44.5%.

Life of production assets of 7.8 years is the average useful life of capital assets used in Alphabet Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GOOGL is equal to -5.9%. 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 - $177628 million for Alphabet Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 695.186 million for Alphabet Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Alphabet Inc. at the current share price and the inputted number of shares is $791.5 billion.

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