Intrinsic value of Intel - INTC

Previous Close

$40.43

  Intrinsic Value

$40.49

stock screener

  Rating & Target

hold

0%

Previous close

$40.43

 
Intrinsic value

$40.49

 
Up/down potential

0%

 
Rating

hold

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

We calculate the intrinsic value of INTC 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 190.0

 

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, %
  7.28
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.84
  5.76
  5.68
  5.62
  5.55
  5.50
  5.45
  5.40
  5.36
  5.33
  5.29
  5.26
  5.24
  5.21
  5.19
Revenue, $m
  59,387
  64,791
  70,422
  76,281
  82,375
  88,710
  95,293
  102,134
  109,244
  116,634
  124,318
  132,312
  140,630
  149,289
  158,310
  167,710
  177,511
  187,736
  198,406
  209,547
  221,185
  233,347
  246,061
  259,358
  273,268
  287,825
  303,064
  319,020
  335,731
  353,238
  371,582
Variable operating expenses, $m
 
  48,012
  52,061
  56,276
  60,659
  65,215
  69,950
  74,871
  79,985
  85,300
  90,827
  95,166
  101,149
  107,378
  113,866
  120,627
  127,677
  135,031
  142,705
  150,719
  159,089
  167,837
  176,982
  186,545
  196,551
  207,021
  217,981
  229,458
  241,478
  254,070
  267,264
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
  46,605
  48,012
  52,061
  56,276
  60,659
  65,215
  69,950
  74,871
  79,985
  85,300
  90,827
  95,166
  101,149
  107,378
  113,866
  120,627
  127,677
  135,031
  142,705
  150,719
  159,089
  167,837
  176,982
  186,545
  196,551
  207,021
  217,981
  229,458
  241,478
  254,070
  267,264
Operating income, $m
  12,782
  16,780
  18,360
  20,005
  21,716
  23,495
  25,343
  27,263
  29,259
  31,334
  33,491
  37,145
  39,480
  41,912
  44,444
  47,083
  49,835
  52,705
  55,701
  58,828
  62,096
  65,510
  69,079
  72,812
  76,718
  80,804
  85,082
  89,562
  94,253
  99,168
  104,318
EBITDA, $m
  20,572
  24,631
  26,772
  28,999
  31,316
  33,724
  36,227
  38,827
  41,530
  44,340
  47,261
  50,300
  53,462
  56,754
  60,183
  63,757
  67,483
  71,370
  75,426
  79,662
  84,086
  88,709
  93,543
  98,598
  103,886
  109,420
  115,213
  121,279
  127,632
  134,287
  141,261
Interest expense (income), $m
  682
  723
  857
  998
  1,145
  1,297
  1,456
  1,620
  1,791
  1,969
  2,154
  2,346
  2,546
  2,754
  2,971
  3,197
  3,432
  3,677
  3,933
  4,200
  4,478
  4,770
  5,074
  5,392
  5,725
  6,073
  6,437
  6,818
  7,217
  7,635
  8,073
Earnings before tax, $m
  12,936
  16,057
  17,503
  19,007
  20,572
  22,198
  23,887
  25,643
  27,468
  29,365
  31,337
  34,799
  36,934
  39,157
  41,473
  43,886
  46,403
  49,028
  51,768
  54,629
  57,617
  60,740
  64,006
  67,420
  70,993
  74,732
  78,646
  82,744
  87,036
  91,533
  96,245
Tax expense, $m
  2,620
  4,335
  4,726
  5,132
  5,554
  5,993
  6,450
  6,924
  7,416
  7,929
  8,461
  9,396
  9,972
  10,572
  11,198
  11,849
  12,529
  13,238
  13,977
  14,750
  15,557
  16,400
  17,282
  18,204
  19,168
  20,178
  21,234
  22,341
  23,500
  24,714
  25,986
Net income, $m
  10,316
  11,722
  12,777
  13,875
  15,017
  16,204
  17,438
  18,719
  20,052
  21,436
  22,876
  25,403
  26,962
  28,585
  30,275
  32,037
  33,874
  35,790
  37,791
  39,879
  42,061
  44,341
  46,724
  49,217
  51,825
  54,554
  57,411
  60,403
  63,537
  66,819
  70,259

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  17,099
  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
  113,327
  105,010
  114,135
  123,633
  133,510
  143,776
  154,446
  165,534
  177,056
  189,034
  201,489
  214,443
  227,925
  241,960
  256,580
  271,815
  287,701
  304,272
  321,566
  339,623
  358,485
  378,196
  398,803
  420,353
  442,898
  466,491
  491,189
  517,050
  544,135
  572,509
  602,240
Adjusted assets (=assets-cash), $m
  96,228
  105,010
  114,135
  123,633
  133,510
  143,776
  154,446
  165,534
  177,056
  189,034
  201,489
  214,443
  227,925
  241,960
  256,580
  271,815
  287,701
  304,272
  321,566
  339,623
  358,485
  378,196
  398,803
  420,353
  442,898
  466,491
  491,189
  517,050
  544,135
  572,509
  602,240
Revenue / Adjusted assets
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
  0.617
Average production assets, $m
  40,728
  44,447
  48,309
  52,329
  56,510
  60,855
  65,371
  70,064
  74,941
  80,011
  85,282
  90,766
  96,472
  102,413
  108,601
  115,049
  121,773
  128,787
  136,107
  143,749
  151,733
  160,076
  168,798
  177,919
  187,462
  197,448
  207,902
  218,847
  230,312
  242,321
  254,905
Working capital, $m
  15,206
  2,980
  3,239
  3,509
  3,789
  4,081
  4,383
  4,698
  5,025
  5,365
  5,719
  6,086
  6,469
  6,867
  7,282
  7,715
  8,166
  8,636
  9,127
  9,639
  10,175
  10,734
  11,319
  11,930
  12,570
  13,240
  13,941
  14,675
  15,444
  16,249
  17,093
Total debt, $m
  25,283
  24,491
  28,516
  32,704
  37,060
  41,587
  46,293
  51,182
  56,264
  61,546
  67,038
  72,752
  78,697
  84,886
  91,334
  98,053
  105,058
  112,366
  119,992
  127,956
  136,274
  144,966
  154,054
  163,558
  173,500
  183,905
  194,796
  206,201
  218,145
  230,659
  243,770
Total liabilities, $m
  47,101
  46,309
  50,334
  54,522
  58,878
  63,405
  68,111
  73,000
  78,082
  83,364
  88,856
  94,570
  100,515
  106,704
  113,152
  119,871
  126,876
  134,184
  141,810
  149,774
  158,092
  166,784
  175,872
  185,376
  195,318
  205,723
  216,614
  228,019
  239,963
  252,477
  265,588
Total equity, $m
  66,226
  58,701
  63,802
  69,111
  74,632
  80,371
  86,335
  92,533
  98,975
  105,670
  112,632
  119,874
  127,410
  135,256
  143,428
  151,945
  160,825
  170,088
  179,755
  189,849
  200,393
  211,412
  222,931
  234,977
  247,580
  260,769
  274,575
  289,031
  304,171
  320,033
  336,652
Total liabilities and equity, $m
  113,327
  105,010
  114,136
  123,633
  133,510
  143,776
  154,446
  165,533
  177,057
  189,034
  201,488
  214,444
  227,925
  241,960
  256,580
  271,816
  287,701
  304,272
  321,565
  339,623
  358,485
  378,196
  398,803
  420,353
  442,898
  466,492
  491,189
  517,050
  544,134
  572,510
  602,240
Debt-to-equity ratio
  0.382
  0.420
  0.450
  0.470
  0.500
  0.520
  0.540
  0.550
  0.570
  0.580
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.670
  0.670
  0.680
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.710
  0.720
  0.720
  0.720
Adjusted equity ratio
  0.511
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559
  0.559

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10,316
  11,722
  12,777
  13,875
  15,017
  16,204
  17,438
  18,719
  20,052
  21,436
  22,876
  25,403
  26,962
  28,585
  30,275
  32,037
  33,874
  35,790
  37,791
  39,879
  42,061
  44,341
  46,724
  49,217
  51,825
  54,554
  57,411
  60,403
  63,537
  66,819
  70,259
Depreciation, amort., depletion, $m
  7,790
  7,851
  8,411
  8,994
  9,600
  10,229
  10,884
  11,564
  12,271
  13,006
  13,770
  13,154
  13,981
  14,842
  15,739
  16,674
  17,648
  18,665
  19,726
  20,833
  21,990
  23,199
  24,463
  25,785
  27,168
  28,616
  30,131
  31,717
  33,378
  35,119
  36,943
Funds from operations, $m
  22,476
  19,573
  21,189
  22,869
  24,617
  26,434
  28,322
  30,284
  32,323
  34,442
  36,646
  38,558
  40,943
  43,427
  46,014
  48,711
  51,522
  54,455
  57,516
  60,712
  64,051
  67,540
  71,188
  75,002
  78,993
  83,170
  87,542
  92,120
  96,915
  101,938
  107,202
Change in working capital, $m
  668
  249
  259
  270
  280
  291
  303
  315
  327
  340
  353
  368
  383
  398
  415
  432
  451
  470
  491
  512
  535
  559
  585
  612
  640
  670
  701
  734
  769
  805
  844
Cash from operations, $m
  21,808
  19,324
  20,930
  22,600
  24,337
  26,142
  28,019
  29,969
  31,996
  34,102
  36,292
  38,190
  40,561
  43,029
  45,600
  48,278
  51,071
  53,985
  57,025
  60,200
  63,516
  66,981
  70,603
  74,391
  78,353
  82,500
  86,841
  91,386
  96,146
  101,133
  106,358
Maintenance CAPEX, $m
  0
  -5,903
  -6,442
  -7,001
  -7,584
  -8,190
  -8,820
  -9,474
  -10,154
  -10,861
  -11,596
  -12,360
  -13,154
  -13,981
  -14,842
  -15,739
  -16,674
  -17,648
  -18,665
  -19,726
  -20,833
  -21,990
  -23,199
  -24,463
  -25,785
  -27,168
  -28,616
  -30,131
  -31,717
  -33,378
  -35,119
New CAPEX, $m
  -9,625
  -3,719
  -3,862
  -4,020
  -4,181
  -4,346
  -4,516
  -4,693
  -4,877
  -5,070
  -5,271
  -5,483
  -5,706
  -5,941
  -6,188
  -6,449
  -6,724
  -7,014
  -7,320
  -7,643
  -7,984
  -8,343
  -8,722
  -9,121
  -9,542
  -9,986
  -10,454
  -10,946
  -11,464
  -12,010
  -12,584
Cash from investing activities, $m
  -25,817
  -9,622
  -10,304
  -11,021
  -11,765
  -12,536
  -13,336
  -14,167
  -15,031
  -15,931
  -16,867
  -17,843
  -18,860
  -19,922
  -21,030
  -22,188
  -23,398
  -24,662
  -25,985
  -27,369
  -28,817
  -30,333
  -31,921
  -33,584
  -35,327
  -37,154
  -39,070
  -41,077
  -43,181
  -45,388
  -47,703
Free cash flow, $m
  -4,009
  9,703
  10,626
  11,578
  12,572
  13,607
  14,683
  15,802
  16,964
  18,171
  19,425
  20,347
  21,700
  23,107
  24,569
  26,091
  27,674
  29,323
  31,041
  32,831
  34,699
  36,647
  38,681
  40,806
  43,025
  45,346
  47,772
  50,310
  52,965
  55,745
  58,655
Issuance/(repayment) of debt, $m
  1,219
  3,842
  4,024
  4,188
  4,356
  4,528
  4,705
  4,890
  5,082
  5,282
  5,492
  5,713
  5,945
  6,190
  6,447
  6,719
  7,005
  7,308
  7,627
  7,963
  8,318
  8,693
  9,087
  9,504
  9,942
  10,405
  10,892
  11,405
  11,945
  12,513
  13,111
Issuance/(repurchase) of shares, $m
  -1,479
  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  
  -814
  3,842
  4,024
  4,188
  4,356
  4,528
  4,705
  4,890
  5,082
  5,282
  5,492
  5,713
  5,945
  6,190
  6,447
  6,719
  7,005
  7,308
  7,627
  7,963
  8,318
  8,693
  9,087
  9,504
  9,942
  10,405
  10,892
  11,405
  11,945
  12,513
  13,111
Total cash flow (excl. dividends), $m
  -4,823
  13,545
  14,650
  15,767
  16,928
  18,135
  19,389
  20,691
  22,046
  23,453
  24,918
  26,060
  27,645
  29,296
  31,016
  32,809
  34,679
  36,631
  38,667
  40,794
  43,017
  45,340
  47,769
  50,309
  52,968
  55,750
  58,663
  61,714
  64,910
  68,258
  71,766
Retained Cash Flow (-), $m
  -5,141
  -4,940
  -5,101
  -5,309
  -5,521
  -5,739
  -5,964
  -6,198
  -6,441
  -6,696
  -6,962
  -7,242
  -7,536
  -7,846
  -8,172
  -8,517
  -8,880
  -9,263
  -9,667
  -10,094
  -10,544
  -11,019
  -11,519
  -12,047
  -12,603
  -13,189
  -13,806
  -14,456
  -15,141
  -15,861
  -16,620
Prev. year cash balance distribution, $m
 
  12,465
  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
 
  21,071
  9,549
  10,458
  11,407
  12,395
  13,424
  14,494
  15,604
  16,758
  17,956
  18,818
  20,109
  21,451
  22,844
  24,293
  25,800
  27,367
  29,000
  30,701
  32,473
  34,321
  36,250
  38,263
  40,365
  42,562
  44,858
  47,258
  49,769
  52,397
  55,147
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
 
  20,202
  8,742
  9,101
  9,392
  9,608
  9,742
  9,792
  9,753
  9,627
  9,413
  8,937
  8,581
  8,156
  7,669
  7,132
  6,556
  5,955
  5,341
  4,727
  4,126
  3,550
  3,008
  2,508
  2,056
  1,656
  1,309
  1,014
  770
  572
  415
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

Intel Corporation is engaged in designing and manufacturing products and technologies, such as the cloud. The Company's segments are Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), Intel Security Group (ISecG), Programmable Solutions Group (PSG), All Other and New Technology Group (NTG). It delivers computer, networking and communications platforms to a set of customers, including original equipment manufacturers (OEMs), original design manufacturers (ODMs), cloud and communications service providers, as well as industrial, communications and automotive equipment manufacturers. It offers platforms to integrate various components and technologies, including a microprocessor and chipset, a stand-alone System-on-Chip (SoC), or a multichip package. The CCG operating segment includes platforms that integrates in notebook, two in one systems, desktop computers for consumers and businesses, tablets, and phones.

FINANCIAL RATIOS  of  Intel (INTC)

Valuation Ratios
P/E Ratio 18.5
Price to Sales 3.2
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 8.8
Price to Free Cash Flow 15.7
Growth Rates
Sales Growth Rate 7.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.3%
Cap. Spend. - 3 Yr. Gr. Rate -2.2%
Financial Strength
Quick Ratio 4
Current Ratio 0.4
LT Debt to Equity 31.2%
Total Debt to Equity 38.2%
Interest Coverage 20
Management Effectiveness
Return On Assets 10.1%
Ret/ On Assets - 3 Yr. Avg. 11.6%
Return On Total Capital 11.8%
Ret/ On T. Cap. - 3 Yr. Avg. 14.4%
Return On Equity 16.2%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 60.9%
Gross Margin - 3 Yr. Avg. 62.4%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 40.6%
Operating Margin 21.5%
Oper. Margin - 3 Yr. Avg. 24.8%
Pre-Tax Margin 21.8%
Pre-Tax Margin - 3 Yr. Avg. 25.2%
Net Profit Margin 17.4%
Net Profit Margin - 3 Yr. Avg. 19.6%
Effective Tax Rate 20.3%
Eff/ Tax Rate - 3 Yr. Avg. 21.9%
Payout Ratio 47.7%

INTC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INTC stock intrinsic value calculation we used $59387 million for the last fiscal year's total revenue generated by Intel. The default revenue input number comes from 2016 income statement of Intel. 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 INTC stock valuation model: a) initial revenue growth rate of 9.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for INTC is calculated based on our internal credit rating of Intel, 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 Intel.
    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 INTC stock the variable cost ratio is equal to 74.3%.

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 INTC 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 Intel.

Corporate tax rate of 27% is the nominal tax rate for Intel. 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 INTC 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 INTC are equal to 68.6%.

Life of production assets of 6.9 years is the average useful life of capital assets used in Intel 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 INTC is equal to 4.6%. 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 - $66226 million for Intel - 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 4698.99 million for Intel 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 Intel at the current share price and the inputted number of shares is $190.0 billion.

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Financial statements of INTC
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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