Intrinsic value of JD.com ADR - JD

Previous Close

$40.32

  Intrinsic Value

$318.82

stock screener

  Rating & Target

str. buy

+691%

  Value-price divergence*

+126%

Previous close

$40.32

 
Intrinsic value

$318.82

 
Up/down potential

+691%

 
Rating

str. buy

 
Value-price divergence*

+126%

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

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 55.9

 

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, %
  43.49
  43.60
  39.74
  36.27
  33.14
  30.33
  27.79
  25.51
  23.46
  21.62
  19.95
  18.46
  17.11
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
Revenue, $m
  37,632
  54,040
  75,515
  102,901
  137,002
  178,548
  228,172
  286,387
  353,580
  430,010
  515,816
  611,030
  715,597
  829,389
  952,235
  1,083,933
  1,224,275
  1,373,056
  1,530,098
  1,695,252
  1,868,410
  2,049,512
  2,238,550
  2,435,570
  2,640,672
  2,854,011
  3,075,799
  3,306,298
  3,545,826
  3,794,747
  4,053,477
Variable operating expenses, $m
 
  51,026
  71,266
  97,077
  129,217
  168,374
  215,144
  270,011
  333,339
  405,373
  486,244
  575,888
  674,440
  781,688
  897,468
  1,021,592
  1,153,862
  1,294,087
  1,442,097
  1,597,751
  1,760,950
  1,931,637
  2,109,803
  2,295,491
  2,488,796
  2,689,866
  2,898,898
  3,116,140
  3,341,892
  3,576,497
  3,820,346
Fixed operating expenses, $m
 
  2,493
  2,555
  2,619
  2,684
  2,752
  2,820
  2,891
  2,963
  3,037
  3,113
  3,191
  3,271
  3,353
  3,436
  3,522
  3,610
  3,701
  3,793
  3,888
  3,985
  4,085
  4,187
  4,292
  4,399
  4,509
  4,622
  4,737
  4,855
  4,977
  5,101
Total operating expenses, $m
  37,943
  53,519
  73,821
  99,696
  131,901
  171,126
  217,964
  272,902
  336,302
  408,410
  489,357
  579,079
  677,711
  785,041
  900,904
  1,025,114
  1,157,472
  1,297,788
  1,445,890
  1,601,639
  1,764,935
  1,935,722
  2,113,990
  2,299,783
  2,493,195
  2,694,375
  2,903,520
  3,120,877
  3,346,747
  3,581,474
  3,825,447
Operating income, $m
  -310
  521
  1,693
  3,205
  5,100
  7,423
  10,208
  13,486
  17,278
  21,600
  26,459
  31,952
  37,886
  44,349
  51,330
  58,819
  66,802
  75,269
  84,209
  93,612
  103,474
  113,791
  124,561
  135,787
  147,476
  159,636
  172,279
  185,421
  199,079
  213,274
  228,030
EBITDA, $m
  216
  1,250
  2,676
  4,509
  6,805
  9,616
  12,985
  16,947
  21,529
  26,749
  32,616
  39,134
  46,297
  54,098
  62,523
  71,560
  81,193
  91,409
  102,194
  113,539
  125,436
  137,881
  150,873
  164,416
  178,516
  193,183
  208,434
  224,284
  240,758
  257,878
  275,676
Interest expense (income), $m
  106
  66
  355
  732
  1,213
  1,812
  2,541
  3,413
  4,436
  5,616
  6,958
  8,465
  10,138
  11,974
  13,973
  16,130
  18,444
  20,909
  23,522
  26,280
  29,181
  32,222
  35,403
  38,723
  42,184
  45,786
  49,533
  53,429
  57,477
  61,684
  66,056
Earnings before tax, $m
  -468
  454
  1,339
  2,473
  3,888
  5,611
  7,667
  10,073
  12,842
  15,984
  19,501
  23,487
  27,748
  32,375
  37,358
  42,688
  48,359
  54,361
  60,687
  67,332
  74,293
  81,568
  89,158
  97,064
  105,293
  113,850
  122,746
  131,992
  141,601
  151,589
  161,973
Tax expense, $m
  26
  123
  361
  668
  1,050
  1,515
  2,070
  2,720
  3,467
  4,316
  5,265
  6,341
  7,492
  8,741
  10,087
  11,526
  13,057
  14,677
  16,385
  18,180
  20,059
  22,023
  24,073
  26,207
  28,429
  30,740
  33,141
  35,638
  38,232
  40,929
  43,733
Net income, $m
  -551
  332
  977
  1,805
  2,838
  4,096
  5,597
  7,353
  9,375
  11,668
  14,236
  17,145
  20,256
  23,634
  27,271
  31,163
  35,302
  39,683
  44,301
  49,153
  54,234
  59,545
  65,085
  70,857
  76,864
  83,111
  89,605
  96,354
  103,369
  110,660
  118,241

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,561
  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
  23,202
  25,335
  35,403
  48,242
  64,230
  83,708
  106,972
  134,265
  165,767
  201,599
  241,827
  286,465
  335,488
  388,837
  446,430
  508,173
  573,968
  643,721
  717,346
  794,773
  875,954
  960,859
  1,049,484
  1,141,852
  1,238,008
  1,338,027
  1,442,006
  1,550,070
  1,662,366
  1,779,066
  1,900,364
Adjusted assets (=assets-cash), $m
  17,641
  25,335
  35,403
  48,242
  64,230
  83,708
  106,972
  134,265
  165,767
  201,599
  241,827
  286,465
  335,488
  388,837
  446,430
  508,173
  573,968
  643,721
  717,346
  794,773
  875,954
  960,859
  1,049,484
  1,141,852
  1,238,008
  1,338,027
  1,442,006
  1,550,070
  1,662,366
  1,779,066
  1,900,364
Revenue / Adjusted assets
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
  2.133
Average production assets, $m
  2,531
  3,621
  5,059
  6,894
  9,179
  11,963
  15,288
  19,188
  23,690
  28,811
  34,560
  40,939
  47,945
  55,569
  63,800
  72,624
  82,026
  91,995
  102,517
  113,582
  125,183
  137,317
  149,983
  163,183
  176,925
  191,219
  206,079
  221,522
  237,570
  254,248
  271,583
Working capital, $m
  317
  -3,837
  -5,362
  -7,306
  -9,727
  -12,677
  -16,200
  -20,333
  -25,104
  -30,531
  -36,623
  -43,383
  -50,807
  -58,887
  -67,609
  -76,959
  -86,923
  -97,487
  -108,637
  -120,363
  -132,657
  -145,515
  -158,937
  -172,925
  -187,488
  -202,635
  -218,382
  -234,747
  -251,754
  -269,427
  -287,797
Total debt, $m
  4,142
  8,442
  17,423
  28,875
  43,136
  60,510
  81,262
  105,607
  133,707
  165,669
  201,552
  241,370
  285,099
  332,686
  384,059
  439,133
  497,823
  560,042
  625,715
  694,781
  767,194
  842,929
  921,983
  1,004,375
  1,090,146
  1,179,363
  1,272,112
  1,368,505
  1,468,673
  1,572,770
  1,680,968
Total liabilities, $m
  18,298
  22,599
  31,580
  43,032
  57,293
  74,667
  95,419
  119,764
  147,864
  179,826
  215,709
  255,527
  299,256
  346,843
  398,216
  453,290
  511,980
  574,199
  639,872
  708,938
  781,351
  857,086
  936,140
  1,018,532
  1,104,303
  1,193,520
  1,286,269
  1,382,662
  1,482,830
  1,586,927
  1,695,125
Total equity, $m
  4,903
  2,736
  3,824
  5,210
  6,937
  9,040
  11,553
  14,501
  17,903
  21,773
  26,117
  30,938
  36,233
  41,994
  48,214
  54,883
  61,989
  69,522
  77,473
  85,836
  94,603
  103,773
  113,344
  123,320
  133,705
  144,507
  155,737
  167,408
  179,535
  192,139
  205,239
Total liabilities and equity, $m
  23,201
  25,335
  35,404
  48,242
  64,230
  83,707
  106,972
  134,265
  165,767
  201,599
  241,826
  286,465
  335,489
  388,837
  446,430
  508,173
  573,969
  643,721
  717,345
  794,774
  875,954
  960,859
  1,049,484
  1,141,852
  1,238,008
  1,338,027
  1,442,006
  1,550,070
  1,662,365
  1,779,066
  1,900,364
Debt-to-equity ratio
  0.845
  3.090
  4.560
  5.540
  6.220
  6.690
  7.030
  7.280
  7.470
  7.610
  7.720
  7.800
  7.870
  7.920
  7.970
  8.000
  8.030
  8.060
  8.080
  8.090
  8.110
  8.120
  8.130
  8.140
  8.150
  8.160
  8.170
  8.170
  8.180
  8.190
  8.190
Adjusted equity ratio
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108
  0.108

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -551
  332
  977
  1,805
  2,838
  4,096
  5,597
  7,353
  9,375
  11,668
  14,236
  17,145
  20,256
  23,634
  27,271
  31,163
  35,302
  39,683
  44,301
  49,153
  54,234
  59,545
  65,085
  70,857
  76,864
  83,111
  89,605
  96,354
  103,369
  110,660
  118,241
Depreciation, amort., depletion, $m
  526
  730
  982
  1,304
  1,705
  2,193
  2,777
  3,461
  4,251
  5,149
  6,158
  7,182
  8,411
  9,749
  11,193
  12,741
  14,391
  16,139
  17,985
  19,927
  21,962
  24,091
  26,313
  28,629
  31,039
  33,547
  36,154
  38,864
  41,679
  44,605
  47,646
Funds from operations, $m
  1,740
  1,061
  1,960
  3,109
  4,543
  6,289
  8,373
  10,814
  13,626
  16,817
  20,393
  24,327
  28,668
  33,382
  38,464
  43,904
  49,693
  55,823
  62,287
  69,079
  76,196
  83,636
  91,398
  99,485
  107,903
  116,658
  125,759
  135,218
  145,048
  155,265
  165,887
Change in working capital, $m
  472
  -1,165
  -1,525
  -1,944
  -2,421
  -2,950
  -3,523
  -4,133
  -4,771
  -5,427
  -6,092
  -6,760
  -7,424
  -8,079
  -8,722
  -9,351
  -9,964
  -10,564
  -11,150
  -11,726
  -12,294
  -12,858
  -13,422
  -13,988
  -14,562
  -15,147
  -15,747
  -16,365
  -17,006
  -17,673
  -18,370
Cash from operations, $m
  1,268
  2,226
  3,484
  5,054
  6,964
  9,239
  11,897
  14,947
  18,396
  22,244
  26,485
  31,088
  36,092
  41,462
  47,186
  53,254
  59,657
  66,386
  73,437
  80,805
  88,490
  96,494
  104,820
  113,474
  122,465
  131,805
  141,506
  151,583
  162,054
  172,938
  184,257
Maintenance CAPEX, $m
  0
  -444
  -635
  -888
  -1,210
  -1,610
  -2,099
  -2,682
  -3,366
  -4,156
  -5,055
  -6,063
  -7,182
  -8,411
  -9,749
  -11,193
  -12,741
  -14,391
  -16,139
  -17,985
  -19,927
  -21,962
  -24,091
  -26,313
  -28,629
  -31,039
  -33,547
  -36,154
  -38,864
  -41,679
  -44,605
New CAPEX, $m
  -449
  -1,090
  -1,439
  -1,835
  -2,285
  -2,784
  -3,325
  -3,900
  -4,502
  -5,121
  -5,749
  -6,379
  -7,006
  -7,624
  -8,231
  -8,824
  -9,403
  -9,968
  -10,522
  -11,065
  -11,602
  -12,134
  -12,666
  -13,200
  -13,742
  -14,294
  -14,860
  -15,443
  -16,048
  -16,678
  -17,335
Cash from investing activities, $m
  -6,983
  -1,534
  -2,074
  -2,723
  -3,495
  -4,394
  -5,424
  -6,582
  -7,868
  -9,277
  -10,804
  -12,442
  -14,188
  -16,035
  -17,980
  -20,017
  -22,144
  -24,359
  -26,661
  -29,050
  -31,529
  -34,096
  -36,757
  -39,513
  -42,371
  -45,333
  -48,407
  -51,597
  -54,912
  -58,357
  -61,940
Free cash flow, $m
  -5,715
  692
  1,410
  2,331
  3,470
  4,845
  6,473
  8,365
  10,528
  12,967
  15,682
  18,645
  21,904
  25,426
  29,206
  33,237
  37,513
  42,027
  46,776
  51,755
  56,962
  62,398
  68,063
  73,961
  80,095
  86,472
  93,099
  99,986
  107,143
  114,582
  122,317
Issuance/(repayment) of debt, $m
  3,151
  6,864
  8,981
  11,453
  14,261
  17,374
  20,752
  24,345
  28,099
  31,962
  35,883
  39,818
  43,729
  47,587
  51,373
  55,075
  58,689
  62,219
  65,673
  69,066
  72,413
  75,735
  79,054
  82,392
  85,772
  89,216
  92,749
  96,393
  100,168
  104,096
  108,198
Issuance/(repurchase) of shares, $m
  196
  499
  110
  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  
  5,888
  7,363
  9,091
  11,453
  14,261
  17,374
  20,752
  24,345
  28,099
  31,962
  35,883
  39,818
  43,729
  47,587
  51,373
  55,075
  58,689
  62,219
  65,673
  69,066
  72,413
  75,735
  79,054
  82,392
  85,772
  89,216
  92,749
  96,393
  100,168
  104,096
  108,198
Total cash flow (excl. dividends), $m
  276
  8,055
  10,501
  13,784
  17,730
  22,220
  27,225
  32,710
  38,628
  44,929
  51,565
  58,463
  65,632
  73,013
  80,579
  88,312
  96,202
  104,246
  112,449
  120,820
  129,375
  138,133
  147,117
  156,352
  165,866
  175,688
  185,848
  196,378
  207,311
  218,678
  230,515
Retained Cash Flow (-), $m
  -478
  -830
  -1,087
  -1,387
  -1,727
  -2,104
  -2,513
  -2,948
  -3,402
  -3,870
  -4,345
  -4,821
  -5,294
  -5,762
  -6,220
  -6,668
  -7,106
  -7,533
  -7,951
  -8,362
  -8,767
  -9,170
  -9,572
  -9,976
  -10,385
  -10,802
  -11,230
  -11,671
  -12,128
  -12,604
  -13,100
Prev. year cash balance distribution, $m
 
  2,997
  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
 
  10,221
  9,414
  12,397
  16,004
  20,116
  24,713
  29,762
  35,225
  41,059
  47,221
  53,642
  60,338
  67,252
  74,359
  81,644
  89,096
  96,713
  104,497
  112,458
  120,608
  128,964
  137,546
  146,377
  155,481
  164,886
  174,619
  184,707
  195,183
  206,075
  217,415
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
 
  9,800
  8,618
  10,789
  13,178
  15,592
  17,935
  20,107
  22,017
  23,586
  24,756
  25,474
  25,748
  25,570
  24,964
  23,969
  22,641
  21,043
  19,244
  17,315
  15,326
  13,339
  11,413
  9,594
  7,919
  6,414
  5,094
  3,964
  3,020
  2,249
  1,637
Current shareholders' claim on cash, %
  100
  97.5
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1
  97.1

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 -207.6
Price to Sales 3
Price to Book 23.3
Price to Tangible Book
Price to Cash Flow 90.2
Price to Free Cash Flow 139.6
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
LT Debt to Equity 32.2%
Total Debt to Equity 84.5%
Interest Coverage -3
Management Effectiveness
Return On Assets -2.5%
Ret/ On Assets - 3 Yr. Avg. -8.4%
Return On Total Capital -7.7%
Ret/ On T. Cap. - 3 Yr. Avg. -17.2%
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 $37632 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 43.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for 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 94.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2432 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 4.2% 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%.

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 6.7%.

Life of production assets of 5.7 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 -7.1%. 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 - $4903 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 1387.57 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 $55.9 billion.

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COMPANY NEWS

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▶ Why Chinese Luxury E-Tailer Secoo Just Tumbled   [Oct-12-17 08:32AM  Investopedia]
▶ [$$] Need Fresh Hairy Crabs? There Are Rival Apps for That   [07:21AM  The Wall Street Journal]
▶ JD.com Launches Luxury e-Commerce Platform Toplife   [Oct-09-17 10:00PM  GlobeNewswire]
▶ JD Stock Standing Tall Even While Alibaba Thrives   [Oct-05-17 07:55AM  InvestorPlace]
▶ This a Rare Opportunity to Buy JD.Com (JD) Stock   [Oct-04-17 03:40PM  InvestorPlace]
▶ [$$] JD Won't Bow Down to Alibaba, Cainiao   [Oct-03-17 02:57PM  Barrons.com]
▶ Secoo Holding Ltd: 5 Reasons to Buy, 3 Reasons to Avoid   [Oct-01-17 02:48PM  Motley Fool]
▶ "Fast Money" final trades: JUNO, JD and more   [Sep-29-17 05:25PM  CNBC Videos]
▶ How Does Investing In JDcom Inc (JD) Impact Your Portfolio?   [Sep-28-17 03:45PM  Simply Wall St.]
▶ These 3 Top Chinese Internets Get New, Bullish Coverage   [Sep-27-17 04:13PM  Investor's Business Daily]
▶ ETFs with exposure to JD.com, Inc. : September 13, 2017   [Sep-13-17 06:43PM  Capital Cube]
▶ Bitcoin Prices Cant Be Stopped   [06:05AM  InvestorPlace]
▶ Goldman Sachs Increased JD.coms Target Price to $56   [Sep-11-17 01:36PM  Market Realist]
▶ Alibaba Expands Into Groceries To Corral The Digital Consumer   [Sep-08-17 05:20PM  Investor's Business Daily]
▶ Alibaba Expands Into Groceries To Corral The Digital Consumer   [11:55AM  Investor's Business Daily]
▶ Why Tencent Holdings Ltd (TCEHY) Stock Is a No-Brainer   [Sep-05-17 11:13AM  InvestorPlace]
▶ Why Amazon Has Lagged behind in China   [10:38AM  Market Realist]
▶ How Is Go-Jek Different Than Uber?   [Aug-28-17 01:46PM  Benzinga]
▶ [$$] JD: #2 to Alibaba Still Means 260 Million Users   [Aug-24-17 07:08AM  Barrons.com]
▶ 3 Stocks That Could Put Nvidia's Returns to Shame   [Aug-23-17 08:50PM  Motley Fool]
▶ Can JD.com Stock Bounce Back After Last Week's 12% Drop?   [Aug-20-17 12:07PM  Motley Fool]
▶ JD.Com Inc(ADR) (JD) Stock Goes on Fear Sale. Grab Some!   [Aug-18-17 09:40AM  InvestorPlace]
▶ Inside JDs Plan To Re-Engineer Delivery   [10:36AM  Market Realist]
Financial statements of JD
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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