Intrinsic value of JD.com ADR - JD

Previous Close

$32.22

  Intrinsic Value

$84.32

stock screener

  Rating & Target

str. buy

+162%

Previous close

$32.22

 
Intrinsic value

$84.32

 
Up/down potential

+162%

 
Rating

str. buy

We calculate the intrinsic value of JD 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 90.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  34.10
  31.19
  28.57
  26.21
  24.09
  22.18
  20.46
  18.92
  17.53
  16.27
  15.15
  14.13
  13.22
  12.40
  11.66
  10.99
  10.39
  9.85
  9.37
  8.93
  8.54
  8.18
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
Revenue, $m
  50,227
  65,893
  84,719
  106,928
  132,689
  162,124
  195,302
  232,250
  272,956
  317,377
  365,448
  417,093
  472,227
  530,769
  592,641
  657,781
  726,139
  797,686
  872,412
  950,327
  1,031,464
  1,115,880
  1,203,652
  1,294,878
  1,389,679
  1,488,194
  1,590,585
  1,697,029
  1,807,725
  1,922,889
Variable operating expenses, $m
  46,525
  60,958
  78,303
  98,763
  122,497
  149,615
  180,182
  214,222
  251,724
  292,648
  336,685
  384,265
  435,060
  488,994
  545,996
  606,009
  668,987
  734,903
  803,747
  875,529
  950,281
  1,028,053
  1,108,916
  1,192,962
  1,280,302
  1,371,063
  1,465,395
  1,563,461
  1,665,445
  1,771,545
Fixed operating expenses, $m
  3,144
  3,213
  3,284
  3,356
  3,430
  3,505
  3,582
  3,661
  3,741
  3,824
  3,908
  3,994
  4,082
  4,172
  4,263
  4,357
  4,453
  4,551
  4,651
  4,753
  4,858
  4,965
  5,074
  5,186
  5,300
  5,416
  5,536
  5,657
  5,782
  5,909
Total operating expenses, $m
  49,669
  64,171
  81,587
  102,119
  125,927
  153,120
  183,764
  217,883
  255,465
  296,472
  340,593
  388,259
  439,142
  493,166
  550,259
  610,366
  673,440
  739,454
  808,398
  880,282
  955,139
  1,033,018
  1,113,990
  1,198,148
  1,285,602
  1,376,479
  1,470,931
  1,569,118
  1,671,227
  1,777,454
Operating income, $m
  558
  1,722
  3,133
  4,809
  6,763
  9,004
  11,538
  14,368
  17,491
  20,905
  24,855
  28,834
  33,086
  37,603
  42,382
  47,415
  52,699
  58,232
  64,014
  70,044
  76,325
  82,862
  89,661
  96,730
  104,077
  111,714
  119,654
  127,910
  136,498
  145,435
EBITDA, $m
  1,221
  2,514
  4,079
  5,937
  8,102
  10,585
  13,391
  16,523
  19,980
  23,758
  27,852
  32,254
  36,958
  41,956
  47,241
  52,808
  58,653
  64,773
  71,167
  77,836
  84,783
  92,013
  99,531
  107,348
  115,473
  123,918
  132,697
  141,826
  151,322
  161,203
Interest expense (income), $m
  106
  223
  557
  968
  1,461
  2,043
  2,718
  3,489
  4,358
  5,326
  6,393
  7,557
  8,816
  10,170
  11,614
  13,148
  14,769
  16,476
  18,267
  20,141
  22,099
  24,141
  26,267
  28,478
  30,778
  33,168
  35,652
  38,233
  40,916
  43,705
  46,605
Earnings before tax, $m
  336
  1,165
  2,166
  3,348
  4,720
  6,286
  8,049
  10,009
  12,164
  14,512
  17,298
  20,018
  22,916
  25,989
  29,234
  32,646
  36,223
  39,965
  43,872
  47,944
  52,184
  56,596
  61,183
  65,952
  70,909
  76,062
  81,421
  86,994
  92,793
  98,830
Tax expense, $m
  91
  315
  585
  904
  1,274
  1,697
  2,173
  2,702
  3,284
  3,918
  4,671
  5,405
  6,187
  7,017
  7,893
  8,814
  9,780
  10,791
  11,845
  12,945
  14,090
  15,281
  16,519
  17,807
  19,145
  20,537
  21,984
  23,488
  25,054
  26,684
Net income, $m
  245
  850
  1,581
  2,444
  3,445
  4,589
  5,876
  7,307
  8,880
  10,594
  12,628
  14,613
  16,729
  18,972
  21,340
  23,831
  26,443
  29,175
  32,027
  34,999
  38,095
  41,315
  44,664
  48,145
  51,763
  55,525
  59,437
  63,506
  67,739
  72,146

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
  30,966
  40,625
  52,231
  65,923
  81,806
  99,953
  120,408
  143,188
  168,284
  195,670
  225,307
  257,147
  291,139
  327,231
  365,377
  405,537
  447,682
  491,792
  537,862
  585,898
  635,921
  687,966
  742,079
  798,322
  856,769
  917,506
  980,632
  1,046,257
  1,114,504
  1,185,505
Adjusted assets (=assets-cash), $m
  30,966
  40,625
  52,231
  65,923
  81,806
  99,953
  120,408
  143,188
  168,284
  195,670
  225,307
  257,147
  291,139
  327,231
  365,377
  405,537
  447,682
  491,792
  537,862
  585,898
  635,921
  687,966
  742,079
  798,322
  856,769
  917,506
  980,632
  1,046,257
  1,114,504
  1,185,505
Revenue / Adjusted assets
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
  1.622
Average production assets, $m
  4,119
  5,403
  6,947
  8,768
  10,881
  13,294
  16,015
  19,045
  22,382
  26,025
  29,967
  34,202
  38,723
  43,523
  48,597
  53,938
  59,543
  65,410
  71,538
  77,927
  84,580
  91,502
  98,699
  106,180
  113,954
  122,032
  130,428
  139,156
  148,233
  157,677
Working capital, $m
  -2,963
  -3,888
  -4,998
  -6,309
  -7,829
  -9,565
  -11,523
  -13,703
  -16,104
  -18,725
  -21,561
  -24,608
  -27,861
  -31,315
  -34,966
  -38,809
  -42,842
  -47,063
  -51,472
  -56,069
  -60,856
  -65,837
  -71,015
  -76,398
  -81,991
  -87,803
  -93,844
  -100,125
  -106,656
  -113,450
Total debt, $m
  10,320
  17,921
  27,056
  37,831
  50,331
  64,613
  80,711
  98,638
  118,389
  139,942
  163,266
  188,325
  215,076
  243,480
  273,501
  305,107
  338,275
  372,990
  409,247
  447,051
  486,420
  527,379
  569,966
  614,229
  660,227
  708,027
  757,707
  809,354
  863,064
  918,942
Total liabilities, $m
  24,370
  31,972
  41,106
  51,882
  64,381
  78,663
  94,761
  112,689
  132,439
  153,992
  177,317
  202,375
  229,126
  257,531
  287,552
  319,158
  352,325
  387,040
  423,297
  461,102
  500,470
  541,429
  584,016
  628,279
  674,277
  722,077
  771,757
  823,404
  877,115
  932,992
Total equity, $m
  6,596
  8,653
  11,125
  14,042
  17,425
  21,290
  25,647
  30,499
  35,844
  41,678
  47,990
  54,772
  62,013
  69,700
  77,825
  86,379
  95,356
  104,752
  114,565
  124,796
  135,451
  146,537
  158,063
  170,043
  182,492
  195,429
  208,875
  222,853
  237,389
  252,513
Total liabilities and equity, $m
  30,966
  40,625
  52,231
  65,924
  81,806
  99,953
  120,408
  143,188
  168,283
  195,670
  225,307
  257,147
  291,139
  327,231
  365,377
  405,537
  447,681
  491,792
  537,862
  585,898
  635,921
  687,966
  742,079
  798,322
  856,769
  917,506
  980,632
  1,046,257
  1,114,504
  1,185,505
Debt-to-equity ratio
  1.560
  2.070
  2.430
  2.690
  2.890
  3.030
  3.150
  3.230
  3.300
  3.360
  3.400
  3.440
  3.470
  3.490
  3.510
  3.530
  3.550
  3.560
  3.570
  3.580
  3.590
  3.600
  3.610
  3.610
  3.620
  3.620
  3.630
  3.630
  3.640
  3.640
Adjusted equity ratio
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213
  0.213

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  245
  850
  1,581
  2,444
  3,445
  4,589
  5,876
  7,307
  8,880
  10,594
  12,628
  14,613
  16,729
  18,972
  21,340
  23,831
  26,443
  29,175
  32,027
  34,999
  38,095
  41,315
  44,664
  48,145
  51,763
  55,525
  59,437
  63,506
  67,739
  72,146
Depreciation, amort., depletion, $m
  663
  792
  946
  1,128
  1,339
  1,581
  1,853
  2,156
  2,489
  2,854
  2,997
  3,420
  3,872
  4,352
  4,860
  5,394
  5,954
  6,541
  7,154
  7,793
  8,458
  9,150
  9,870
  10,618
  11,395
  12,203
  13,043
  13,916
  14,823
  15,768
Funds from operations, $m
  908
  1,642
  2,527
  3,572
  4,785
  6,169
  7,729
  9,462
  11,369
  13,447
  15,625
  18,033
  20,601
  23,325
  26,200
  29,225
  32,397
  35,716
  39,180
  42,792
  46,553
  50,465
  54,534
  58,763
  63,159
  67,729
  72,480
  77,421
  82,562
  87,913
Change in working capital, $m
  -754
  -924
  -1,111
  -1,310
  -1,520
  -1,737
  -1,958
  -2,180
  -2,402
  -2,621
  -2,836
  -3,047
  -3,253
  -3,454
  -3,650
  -3,843
  -4,033
  -4,221
  -4,409
  -4,597
  -4,787
  -4,981
  -5,179
  -5,382
  -5,593
  -5,812
  -6,041
  -6,280
  -6,531
  -6,795
Cash from operations, $m
  1,662
  2,566
  3,637
  4,882
  6,305
  7,906
  9,686
  11,642
  13,771
  16,068
  18,461
  21,080
  23,854
  26,778
  29,851
  33,068
  36,430
  39,937
  43,589
  47,389
  51,340
  55,446
  59,712
  64,145
  68,752
  73,541
  78,521
  83,702
  89,093
  94,708
Maintenance CAPEX, $m
  -307
  -412
  -540
  -695
  -877
  -1,088
  -1,329
  -1,601
  -1,904
  -2,238
  -2,602
  -2,997
  -3,420
  -3,872
  -4,352
  -4,860
  -5,394
  -5,954
  -6,541
  -7,154
  -7,793
  -8,458
  -9,150
  -9,870
  -10,618
  -11,395
  -12,203
  -13,043
  -13,916
  -14,823
New CAPEX, $m
  -1,053
  -1,285
  -1,544
  -1,821
  -2,112
  -2,414
  -2,721
  -3,030
  -3,338
  -3,642
  -3,942
  -4,235
  -4,521
  -4,800
  -5,074
  -5,341
  -5,605
  -5,867
  -6,127
  -6,389
  -6,653
  -6,922
  -7,197
  -7,481
  -7,774
  -8,078
  -8,396
  -8,728
  -9,077
  -9,443
Cash from investing activities, $m
  -1,360
  -1,697
  -2,084
  -2,516
  -2,989
  -3,502
  -4,050
  -4,631
  -5,242
  -5,880
  -6,544
  -7,232
  -7,941
  -8,672
  -9,426
  -10,201
  -10,999
  -11,821
  -12,668
  -13,543
  -14,446
  -15,380
  -16,347
  -17,351
  -18,392
  -19,473
  -20,599
  -21,771
  -22,993
  -24,266
Free cash flow, $m
  302
  870
  1,553
  2,367
  3,315
  4,404
  5,636
  7,011
  8,529
  10,187
  11,916
  13,849
  15,913
  18,106
  20,425
  22,867
  25,431
  28,116
  30,921
  33,846
  36,894
  40,066
  43,365
  46,795
  50,360
  54,067
  57,922
  61,930
  66,101
  70,441
Issuance/(repayment) of debt, $m
  6,197
  7,601
  9,135
  10,776
  12,500
  14,282
  16,098
  17,927
  19,750
  21,553
  23,325
  25,058
  26,751
  28,404
  30,021
  31,606
  33,168
  34,715
  36,257
  37,805
  39,368
  40,959
  42,587
  44,263
  45,998
  47,800
  49,680
  51,647
  53,710
  55,878
Issuance/(repurchase) of shares, $m
  1,432
  1,207
  891
  472
  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  
  7,629
  8,808
  10,026
  11,248
  12,500
  14,282
  16,098
  17,927
  19,750
  21,553
  23,325
  25,058
  26,751
  28,404
  30,021
  31,606
  33,168
  34,715
  36,257
  37,805
  39,368
  40,959
  42,587
  44,263
  45,998
  47,800
  49,680
  51,647
  53,710
  55,878
Total cash flow (excl. dividends), $m
  7,931
  9,678
  11,579
  13,614
  15,815
  18,686
  21,734
  24,938
  28,279
  31,740
  35,241
  38,907
  42,664
  46,510
  50,446
  54,473
  58,599
  62,831
  67,178
  71,651
  76,262
  81,024
  85,952
  91,058
  96,358
  101,867
  107,602
  113,578
  119,811
  126,319
Retained Cash Flow (-), $m
  -1,677
  -2,057
  -2,472
  -2,916
  -3,383
  -3,865
  -4,357
  -4,852
  -5,345
  -5,833
  -6,313
  -6,782
  -7,240
  -7,688
  -8,125
  -8,554
  -8,977
  -9,395
  -9,813
  -10,232
  -10,655
  -11,085
  -11,526
  -11,980
  -12,449
  -12,937
  -13,446
  -13,978
  -14,537
  -15,123
Prev. year cash balance distribution, $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 flow adjustment, $m
  337
  452
  593
  762
  962
  1,194
  1,459
  1,758
  2,090
  2,457
  2,856
  3,289
  3,754
  4,250
  4,777
  5,334
  5,920
  6,535
  7,179
  7,852
  8,553
  9,283
  10,043
  10,833
  11,654
  12,507
  13,394
  14,315
  15,273
  16,270
Cash available for distribution, $m
  6,255
  7,620
  9,107
  10,698
  12,432
  14,821
  17,377
  20,086
  22,934
  25,907
  28,928
  32,125
  35,424
  38,823
  42,320
  45,919
  49,622
  53,435
  57,365
  61,419
  65,607
  69,939
  74,426
  79,078
  83,909
  88,930
  94,156
  99,599
  105,274
  111,196
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
  5,997
  6,976
  7,926
  8,809
  9,636
  10,756
  11,740
  12,554
  13,174
  13,582
  13,738
  13,709
  13,469
  13,033
  12,425
  11,669
  10,797
  9,841
  8,833
  7,804
  6,786
  5,803
  4,878
  4,028
  3,264
  2,595
  2,021
  1,541
  1,149
  837
Current shareholders' claim on cash, %
  97.2
  95.4
  94.5
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1
  94.1

JD.com, Inc. is an online direct sales company. The Company engages in the sale of electronics and home appliance products and general merchandise products (including audio, video products and books) sourced from manufacturers, distributors and publishers in China on the Internet through its Website, www.jd.com. It also offers an online marketplace that enables third-party sellers to sell their products to customers on the Company's Website. The Company operates through the provision of a single class of services for accelerating and improving the delivery of its products over the Internet. The Company also offers online and in-person payment options and customer services. The Company operates approximately 210 warehouses with an aggregate gross floor area of approximately four million square meters in over 50 cities. It operates over 5,370 delivery stations and pickup stations in approximately 2,350 counties and districts across China.

FINANCIAL RATIOS  of  JD.com ADR (JD)

Valuation Ratios
P/E Ratio -165.9
Price to Sales 2.4
Price to Book 18.6
Price to Tangible Book
Price to Cash Flow 72.1
Price to Free Cash Flow 111.6
Growth Rates
Sales Growth Rate 43.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -17.5%
Cap. Spend. - 3 Yr. Gr. Rate 41.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 27%
Total Debt to Equity 59.8%
Interest Coverage -3
Management Effectiveness
Return On Assets -2.5%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital -8.4%
Ret/ On T. Cap. - 3 Yr. Avg. -17.5%
Return On Equity -11.8%
Return On Equity - 3 Yr. Avg. -20%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 15.2%
Gross Margin - 3 Yr. Avg. 13.4%
EBITDA Margin 0.4%
EBITDA Margin - 3 Yr. Avg. -2%
Operating Margin -0.8%
Oper. Margin - 3 Yr. Avg. -3.1%
Pre-Tax Margin -1.2%
Pre-Tax Margin - 3 Yr. Avg. -3.5%
Net Profit Margin -1.5%
Net Profit Margin - 3 Yr. Avg. -3.6%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. -1.9%
Payout Ratio 0%

JD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the JD stock intrinsic value calculation we used $37455 million for the last fiscal year's total revenue generated by JD.com ADR. The default revenue input number comes from 2016 income statement of JD.com ADR. 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 JD stock valuation model: a) initial revenue growth rate of 34.1% 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 JD is calculated based on our internal credit rating of JD.com ADR, 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 JD.com ADR.
    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 JD stock the variable cost ratio is equal to 92.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3076 million in the base year in the intrinsic value calculation for JD 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 JD.com ADR.

Corporate tax rate of 27% is the nominal tax rate for JD.com ADR. 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 JD stock is equal to 0.9%.

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 JD are equal to 8.2%.

Life of production assets of 10 years is the average useful life of capital assets used in JD.com ADR 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 JD 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 - $4919 million for JD.com ADR - 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 2805 million for JD.com ADR 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 JD.com ADR at the current share price and the inputted number of shares is $90.4 billion.

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COMPANY NEWS

▶ Should You Buy 58.Com Inc After Boffo Earnings?   [Aug-17-18 11:51PM  InvestorPlace]
▶ China's JD.com is good at creating new value: Analyst   [Aug-16-18 11:38PM  CNBC Videos]
▶ Dont Go Contrarian on JD.com Stock Just Yet   [03:58PM  InvestorPlace]
▶ JD.Com Stock Higher Despite Q2 Earnings Miss   [12:49PM  InvestorPlace]
▶ JD.com Announces Second Quarter 2018 Results   [06:00AM  GlobeNewswire]
▶ 5 Top Stock Trades for Thursday Buy Alibaba Into Support?   [Aug-15-18 03:44PM  InvestorPlace]
▶ Tesla Rival Nio Files for $1.8B US IPO   [10:15AM  Investopedia]
▶ The Trade War Is Turning Chinese Stocks Into Bargains   [Aug-13-18 06:14PM  InvestorPlace]
▶ 3 Earnings Reports to Watch Next Week   [Aug-10-18 10:09AM  InvestorPlace]
▶ This No. 1 Logistics Firm, Backed By Alibaba, Is Set To Report   [03:50PM  Investor's Business Daily]
▶ Who Manufactured Pinduoduos Counterfeit Rally?   [Aug-07-18 02:38PM  IPO-Edge.com]
▶ 4 Chinese Stocks To Buy During the Tech Dip   [10:34AM  InvestorPlace]
▶ JD.com Is a Great Company, But Amazon Is the Better Bet   [Aug-06-18 04:36PM  InvestorPlace]
▶ Trade of the Day: JD.Com Inc (ADR) (JD)   [09:13AM  InvestorPlace]
▶ Will Pinduoduo Disrupt Chinas E-Commerce Market?   [Aug-05-18 01:53PM  Motley Fool]
▶ IQiyi stock downgraded to neutral at Goldman Sachs   [Aug-02-18 08:29AM  MarketWatch]
▶ Chinas Online Shopping Giants Open Thousands of Bricks-and-Mortar Stores   [Jul-31-18 07:44PM  The Wall Street Journal]
▶ The 5 Best Stocks to Buy for August   [02:40PM  InvestorPlace]
▶ Your questions for the Halftime traders   [01:26PM  CNBC Videos]
▶ China's Online Retail Giants Expand Bricks-and-Mortar Push   [07:00AM  The Wall Street Journal]
▶ 3 Top Tech Stocks to Buy in July   [06:00AM  Motley Fool]
▶ IQiyi Stock Could Reach $50 This Year   [Jul-30-18 12:19PM  InvestorPlace]
▶ 2 Reasons JD.com Is a Better Growth Stock Than Alibaba   [Jul-28-18 09:14AM  Motley Fool]
▶ Chinese Stocks: Are They Finally Cheap?   [Jul-26-18 11:57AM  InvestorPlace]
▶ Google's latest bet on China is a doodle game   [Jul-19-18 04:41PM  Yahoo Finance]
▶ [$$] L Catterton Asia, JD.com Invest $175 Million in Secoo   [Jul-09-18 07:11PM  The Wall Street Journal]
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