Intrinsic value of Netease ADR - NTES

Previous Close

$200.25

  Intrinsic Value

$110.19

stock screener

  Rating & Target

sell

-45%

Previous close

$200.25

 
Intrinsic value

$110.19

 
Up/down potential

-45%

 
Rating

sell

We calculate the intrinsic value of NTES 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 657.2

 

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, %
  56.50
  51.35
  46.72
  42.54
  38.79
  35.41
  32.37
  29.63
  27.17
  24.95
  22.96
  21.16
  19.55
  18.09
  16.78
  15.60
  14.54
  13.59
  12.73
  11.96
  11.26
  10.64
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.70
  7.43
Revenue, $m
  8,603
  13,020
  19,103
  27,230
  37,792
  51,174
  67,739
  87,812
  111,669
  139,533
  171,565
  207,871
  248,499
  293,455
  342,701
  396,174
  453,789
  515,454
  581,070
  650,548
  723,808
  800,785
  881,437
  965,741
  1,053,701
  1,145,343
  1,240,721
  1,339,913
  1,443,022
  1,550,177
Variable operating expenses, $m
  5,570
  8,426
  12,358
  17,611
  24,439
  33,090
  43,799
  56,775
  72,197
  90,210
  110,909
  134,379
  160,643
  189,705
  221,540
  256,108
  293,354
  333,217
  375,635
  420,549
  467,908
  517,671
  569,808
  624,307
  681,169
  740,411
  802,069
  866,192
  932,847
  1,002,118
Fixed operating expenses, $m
  122
  124
  127
  130
  133
  136
  139
  142
  145
  148
  151
  155
  158
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
Total operating expenses, $m
  5,692
  8,550
  12,485
  17,741
  24,572
  33,226
  43,938
  56,917
  72,342
  90,358
  111,060
  134,534
  160,801
  189,866
  221,705
  256,277
  293,526
  333,393
  375,815
  420,733
  468,096
  517,863
  570,004
  624,508
  681,374
  740,621
  802,283
  866,411
  933,071
  1,002,347
Operating income, $m
  2,911
  4,471
  6,618
  9,489
  13,220
  17,948
  23,802
  30,895
  39,327
  49,175
  60,505
  73,337
  87,698
  103,588
  120,996
  139,897
  160,263
  182,061
  205,255
  229,815
  255,712
  282,923
  311,432
  341,234
  372,327
  404,722
  438,438
  473,502
  509,952
  547,831
EBITDA, $m
  2,982
  4,573
  6,764
  9,693
  13,501
  18,325
  24,298
  31,536
  40,139
  50,188
  61,740
  74,834
  89,487
  105,701
  123,463
  142,750
  163,531
  185,772
  209,439
  234,499
  260,923
  288,688
  317,779
  348,187
  379,914
  412,969
  447,371
  483,150
  520,341
  558,992
Interest expense (income), $m
  0
  0
  69
  168
  304
  485
  720
  1,019
  1,388
  1,836
  2,368
  2,990
  3,704
  4,514
  5,420
  6,423
  7,521
  8,714
  9,999
  11,374
  12,838
  14,388
  16,022
  17,738
  19,537
  21,418
  23,380
  25,424
  27,551
  29,763
  32,063
Earnings before tax, $m
  2,911
  4,401
  6,450
  9,185
  12,735
  17,228
  22,783
  29,507
  37,491
  46,807
  57,515
  69,633
  83,184
  98,168
  114,573
  132,376
  151,549
  172,062
  193,881
  216,977
  241,324
  266,901
  293,694
  321,696
  350,909
  381,343
  413,014
  445,951
  480,188
  515,768
Tax expense, $m
  786
  1,188
  1,742
  2,480
  3,439
  4,652
  6,151
  7,967
  10,123
  12,638
  15,529
  18,801
  22,460
  26,505
  30,935
  35,742
  40,918
  46,457
  52,348
  58,584
  65,158
  72,063
  79,297
  86,858
  94,745
  102,963
  111,514
  120,407
  129,651
  139,257
Net income, $m
  2,125
  3,213
  4,709
  6,705
  9,297
  12,576
  16,631
  21,540
  27,368
  34,169
  41,986
  50,832
  60,724
  71,663
  83,638
  96,634
  110,631
  125,605
  141,533
  158,393
  176,167
  194,838
  214,397
  234,838
  256,164
  278,380
  301,501
  325,545
  350,537
  376,510

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
  8,501
  12,866
  18,876
  26,907
  37,344
  50,567
  66,936
  86,770
  110,345
  137,878
  169,531
  205,406
  245,553
  289,975
  338,637
  391,476
  448,409
  509,342
  574,180
  642,834
  715,225
  791,290
  870,985
  954,290
  1,041,206
  1,131,762
  1,226,009
  1,324,025
  1,425,912
  1,531,796
Adjusted assets (=assets-cash), $m
  8,501
  12,866
  18,876
  26,907
  37,344
  50,567
  66,936
  86,770
  110,345
  137,878
  169,531
  205,406
  245,553
  289,975
  338,637
  391,476
  448,409
  509,342
  574,180
  642,834
  715,225
  791,290
  870,985
  954,290
  1,041,206
  1,131,762
  1,226,009
  1,324,025
  1,425,912
  1,531,796
Revenue / Adjusted assets
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
  1.012
Average production assets, $m
  619
  937
  1,375
  1,961
  2,721
  3,685
  4,877
  6,322
  8,040
  10,046
  12,353
  14,967
  17,892
  21,129
  24,674
  28,525
  32,673
  37,113
  41,837
  46,839
  52,114
  57,657
  63,463
  69,533
  75,866
  82,465
  89,332
  96,474
  103,898
  111,613
Working capital, $m
  43
  65
  96
  136
  189
  256
  339
  439
  558
  698
  858
  1,039
  1,242
  1,467
  1,714
  1,981
  2,269
  2,577
  2,905
  3,253
  3,619
  4,004
  4,407
  4,829
  5,269
  5,727
  6,204
  6,700
  7,215
  7,751
Total debt, $m
  1,285
  3,109
  5,622
  8,979
  13,341
  18,869
  25,711
  34,001
  43,856
  55,365
  68,595
  83,591
  100,373
  118,941
  139,282
  161,368
  185,166
  210,636
  237,739
  266,436
  296,696
  328,491
  361,803
  396,625
  432,956
  470,808
  510,203
  551,174
  593,763
  638,022
Total liabilities, $m
  3,553
  5,378
  7,890
  11,247
  15,610
  21,137
  27,979
  36,270
  46,124
  57,633
  70,864
  85,860
  102,641
  121,209
  141,550
  163,637
  187,435
  212,905
  240,007
  268,705
  298,964
  330,759
  364,072
  398,893
  435,224
  473,076
  512,472
  553,442
  596,031
  640,291
Total equity, $m
  4,947
  7,488
  10,986
  15,660
  21,734
  29,430
  38,957
  50,500
  64,221
  80,245
  98,667
  119,546
  142,912
  168,765
  197,087
  227,839
  260,974
  296,437
  334,173
  374,130
  416,261
  460,531
  506,913
  555,397
  605,982
  658,685
  713,537
  770,582
  829,881
  891,505
Total liabilities and equity, $m
  8,500
  12,866
  18,876
  26,907
  37,344
  50,567
  66,936
  86,770
  110,345
  137,878
  169,531
  205,406
  245,553
  289,974
  338,637
  391,476
  448,409
  509,342
  574,180
  642,835
  715,225
  791,290
  870,985
  954,290
  1,041,206
  1,131,761
  1,226,009
  1,324,024
  1,425,912
  1,531,796
Debt-to-equity ratio
  0.260
  0.420
  0.510
  0.570
  0.610
  0.640
  0.660
  0.670
  0.680
  0.690
  0.700
  0.700
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.710
  0.720
  0.720
  0.720
  0.720
Adjusted equity ratio
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582
  0.582

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,125
  3,213
  4,709
  6,705
  9,297
  12,576
  16,631
  21,540
  27,368
  34,169
  41,986
  50,832
  60,724
  71,663
  83,638
  96,634
  110,631
  125,605
  141,533
  158,393
  176,167
  194,838
  214,397
  234,838
  256,164
  278,380
  301,501
  325,545
  350,537
  376,510
Depreciation, amort., depletion, $m
  70
  102
  146
  205
  281
  377
  496
  641
  813
  1,013
  1,235
  1,497
  1,789
  2,113
  2,467
  2,852
  3,267
  3,711
  4,184
  4,684
  5,211
  5,766
  6,346
  6,953
  7,587
  8,246
  8,933
  9,647
  10,390
  11,161
Funds from operations, $m
  2,196
  3,315
  4,855
  6,910
  9,577
  12,953
  17,128
  22,181
  28,181
  35,182
  43,222
  52,329
  62,514
  73,776
  86,106
  99,487
  113,898
  129,316
  145,717
  163,077
  181,378
  200,603
  220,743
  241,792
  263,750
  286,627
  310,434
  335,192
  360,927
  387,672
Change in working capital, $m
  16
  22
  30
  41
  53
  67
  83
  100
  119
  139
  160
  182
  203
  225
  246
  267
  288
  308
  328
  347
  366
  385
  403
  422
  440
  458
  477
  496
  516
  536
Cash from operations, $m
  2,180
  3,293
  4,824
  6,869
  9,524
  12,886
  17,045
  22,080
  28,062
  35,043
  43,061
  52,147
  62,311
  73,551
  85,859
  99,220
  113,610
  129,008
  145,389
  162,730
  181,012
  200,219
  220,340
  241,370
  263,311
  286,168
  309,957
  334,696
  360,412
  387,136
Maintenance CAPEX, $m
  -40
  -62
  -94
  -138
  -196
  -272
  -368
  -488
  -632
  -804
  -1,005
  -1,235
  -1,497
  -1,789
  -2,113
  -2,467
  -2,852
  -3,267
  -3,711
  -4,184
  -4,684
  -5,211
  -5,766
  -6,346
  -6,953
  -7,587
  -8,246
  -8,933
  -9,647
  -10,390
New CAPEX, $m
  -223
  -318
  -438
  -585
  -760
  -964
  -1,193
  -1,445
  -1,718
  -2,006
  -2,306
  -2,614
  -2,925
  -3,237
  -3,546
  -3,850
  -4,148
  -4,440
  -4,724
  -5,002
  -5,275
  -5,542
  -5,807
  -6,070
  -6,333
  -6,598
  -6,867
  -7,142
  -7,424
  -7,715
Cash from investing activities, $m
  -263
  -380
  -532
  -723
  -956
  -1,236
  -1,561
  -1,933
  -2,350
  -2,810
  -3,311
  -3,849
  -4,422
  -5,026
  -5,659
  -6,317
  -7,000
  -7,707
  -8,435
  -9,186
  -9,959
  -10,753
  -11,573
  -12,416
  -13,286
  -14,185
  -15,113
  -16,075
  -17,071
  -18,105
Free cash flow, $m
  1,917
  2,913
  4,293
  6,146
  8,568
  11,651
  15,484
  20,148
  25,712
  32,233
  39,750
  48,298
  57,889
  68,525
  80,201
  92,902
  106,609
  121,301
  136,953
  153,544
  171,053
  189,465
  208,767
  228,954
  250,024
  271,983
  294,843
  318,621
  343,340
  369,031
Issuance/(repayment) of debt, $m
  1,285
  1,825
  2,512
  3,357
  4,363
  5,527
  6,842
  8,291
  9,854
  11,509
  13,231
  14,996
  16,781
  18,568
  20,341
  22,087
  23,798
  25,470
  27,103
  28,697
  30,259
  31,795
  33,313
  34,821
  36,331
  37,852
  39,395
  40,971
  42,589
  44,260
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  
  1,285
  1,825
  2,512
  3,357
  4,363
  5,527
  6,842
  8,291
  9,854
  11,509
  13,231
  14,996
  16,781
  18,568
  20,341
  22,087
  23,798
  25,470
  27,103
  28,697
  30,259
  31,795
  33,313
  34,821
  36,331
  37,852
  39,395
  40,971
  42,589
  44,260
Total cash flow (excl. dividends), $m
  3,202
  4,738
  6,805
  9,503
  12,931
  17,178
  22,326
  28,438
  35,566
  43,741
  52,981
  63,294
  74,670
  87,093
  100,542
  114,989
  130,407
  146,771
  164,056
  182,241
  201,312
  221,260
  242,080
  263,775
  286,355
  309,836
  334,238
  359,592
  385,929
  413,291
Retained Cash Flow (-), $m
  -1,786
  -2,541
  -3,498
  -4,674
  -6,074
  -7,696
  -9,526
  -11,544
  -13,720
  -16,024
  -18,422
  -20,879
  -23,365
  -25,854
  -28,321
  -30,752
  -33,135
  -35,463
  -37,736
  -39,957
  -42,131
  -44,270
  -46,383
  -48,483
  -50,585
  -52,703
  -54,852
  -57,045
  -59,298
  -61,625
Prev. year cash balance distribution, $m
  2,377
  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
  143
  224
  339
  497
  708
  983
  1,331
  1,761
  2,283
  2,903
  3,628
  4,461
  5,405
  6,461
  7,630
  8,910
  10,301
  11,799
  13,402
  15,108
  16,914
  18,819
  20,820
  22,917
  25,109
  27,396
  29,779
  32,259
  34,838
  37,519
Cash available for distribution, $m
  3,793
  2,197
  3,307
  4,829
  6,856
  9,482
  12,799
  16,895
  21,845
  27,717
  34,559
  42,415
  51,305
  61,240
  72,220
  84,236
  97,273
  111,308
  126,320
  142,284
  159,181
  176,990
  195,697
  215,292
  235,770
  257,132
  279,387
  302,546
  326,631
  351,666
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
  3,636
  2,011
  2,878
  3,976
  5,314
  6,882
  8,647
  10,560
  12,549
  14,531
  16,412
  18,100
  19,507
  20,559
  21,203
  21,406
  21,165
  20,498
  19,450
  18,080
  16,465
  14,686
  12,826
  10,965
  9,172
  7,502
  5,996
  4,681
  3,565
  2,648
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

NetEase, Inc. (NetEase) is a technology company. The Company operates an interactive online community in China and is a provider of Chinese language content and services through its online games, Internet media, e-mail, e-commerce and other businesses. The Company operates through three segments: Online Game Services; Advertising Services, and E-mail, E-commerce and Others. Its online games business primarily focuses on offering personal computer (PC)-client massively multi-player online role-playing games (PC-client MMORPGs), as well as mobile games to the Chinese market. The NetEase Websites provide Internet users with Chinese language online services centered over three core service categories, which include content, community and communication. Its online advertising offerings include banner advertising, direct e-mail, sponsored special events, games, contests and other activities. It offers free and fee-based premium e-mail services to its individual users and corporate users.

FINANCIAL RATIOS  of  Netease ADR (NTES)

Valuation Ratios
P/E Ratio 392
Price to Sales 119.2
Price to Book 119.1
Price to Tangible Book
Price to Cash Flow 293.7
Price to Free Cash Flow 317.1
Growth Rates
Sales Growth Rate 67.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.7%
Cap. Spend. - 3 Yr. Gr. Rate 38.8%
Financial Strength
Quick Ratio 10
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 10%
Interest Coverage 0
Management Effectiveness
Return On Assets 23.4%
Ret/ On Assets - 3 Yr. Avg. 19.9%
Return On Total Capital 31.6%
Ret/ On T. Cap. - 3 Yr. Avg. 25.2%
Return On Equity 34.4%
Return On Equity - 3 Yr. Avg. 27.3%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 56.7%
Gross Margin - 3 Yr. Avg. 62.6%
EBITDA Margin 37.2%
EBITDA Margin - 3 Yr. Avg. 40.6%
Operating Margin 33.1%
Oper. Margin - 3 Yr. Avg. 35.2%
Pre-Tax Margin 36.4%
Pre-Tax Margin - 3 Yr. Avg. 39.5%
Net Profit Margin 30.4%
Net Profit Margin - 3 Yr. Avg. 33.5%
Effective Tax Rate 15.1%
Eff/ Tax Rate - 3 Yr. Avg. 14.3%
Payout Ratio 21.9%

NTES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NTES stock intrinsic value calculation we used $5497 million for the last fiscal year's total revenue generated by Netease ADR. The default revenue input number comes from 2016 income statement of Netease 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 NTES stock valuation model: a) initial revenue growth rate of 56.5% 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 NTES is calculated based on our internal credit rating of Netease 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 Netease 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 NTES stock the variable cost ratio is equal to 64.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $119 million in the base year in the intrinsic value calculation for NTES 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 Netease ADR.

Corporate tax rate of 27% is the nominal tax rate for Netease 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 NTES stock is equal to 2.6%.

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 NTES are equal to 7.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Netease 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 NTES is equal to 0.5%. 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 - $5538 million for Netease 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 3282 million for Netease 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 Netease ADR at the current share price and the inputted number of shares is $657.2 billion.

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COMPANY NEWS

▶ Why Shares of NetEase Inc. Tumbled Today   [Aug-09-18 04:24PM  Motley Fool]
▶ NetEase Still Can't Win the Earnings Game   [01:58PM  Motley Fool]
▶ NetEase: 2Q Earnings Snapshot   [Aug-08-18 07:16PM  Associated Press]
▶ How To Trade Stocks: What Is A Base? And How To Use Stock Charts To Win Big   [Aug-03-18 10:00AM  Investor's Business Daily]
▶ Why NetEase, Inc. Stock Gained 10.7% in June   [Jul-11-18 12:35PM  Motley Fool]
▶ Stocks Jump Into Short Session; Oil Prices Climb, NetEase Upgraded   [Jul-03-18 08:59AM  Investor's Business Daily]
▶ 7 Favorite Picks of a $40 Billion Portfolio Star   [Jul-02-18 08:00AM  Investopedia]
▶ Should You Chase Bilibilis Post-IPO Rally?   [Jun-27-18 11:11AM  Motley Fool]
▶ Are NetEases Days of High Growth Over?   [Jun-20-18 09:48PM  Motley Fool]
▶ NetEase doubles stock repurchase program to $2 billion   [Jun-11-18 08:55AM  MarketWatch]
▶ 2 of Tencent's Biggest Games Aren't Getting Along   [Jun-06-18 08:03PM  Motley Fool]
▶ NetEase Announces Strategic Investment in Bungie   [Jun-01-18 05:00PM  PR Newswire]
▶ Why Is No One Talking About NetEase Inc. Stock?   [May-29-18 05:33PM  Motley Fool]
▶ Should You Buy NetEase After Its 30% Decline in 2018?   [May-24-18 11:33AM  Motley Fool]
▶ What's Behind NetEase's Plunging Profit?   [10:18AM  Motley Fool]
▶ NetEase: 1Q Earnings Snapshot   [May-16-18 07:11PM  Associated Press]
▶ Activision Blizzard, Inc. Is the Best U.S. Video Game Stock   [May-11-18 11:12AM  InvestorPlace]
▶ NetEase Stock Has Growth Potential; Buy Shares 6.5% Lower   [May-09-18 08:26AM  Investopedia]
▶ Good Stocks To Protect Your Portfolio During A Bear Market   [May-07-18 04:05PM  Simply Wall St.]
▶ Tencent's Growth Threatens These 5 Companies   [Apr-17-18 05:05PM  Motley Fool]
▶ Moving Average Crossover Alert: NetEase (NTES)   [Apr-13-18 08:17AM  Zacks]
▶ Maker of World's Top Video Game Sues Chinese Company   [Apr-06-18 04:07AM  Bloomberg]
▶ Trump's Tariffs Can't Sink These 3 Chinese Stocks   [Mar-28-18 09:45AM  Motley Fool]
▶ NetEase Inc (NASDAQ:NTES): What Are The Future Prospects?   [Mar-27-18 05:28PM  Simply Wall St.]
▶ 2 Top Chinese Internet Stocks You Should Look At   [Mar-12-18 09:18PM  Motley Fool]
▶ Andreas Halvorsen's Top Picks in the 4th Quarter   [Mar-06-18 12:24PM  GuruFocus.com]
▶ Is NetEase in Trouble?   [Feb-25-18 01:26PM  Motley Fool]
▶ Zynga Inc Stock Could Be a Big Winner, But Its Still Risky   [Feb-09-18 12:09PM  InvestorPlace]
▶ NetEase Sees Online Game Revenue Fall   [07:18AM  Motley Fool]
▶ NetEase posts 4Q profit   [06:21PM  Associated Press]
▶ Tencent's New Sony Partnership Targets NetEase   [Feb-06-18 07:00AM  Motley Fool]
▶ What to Expect From NetEases Q4 Earnings   [Feb-05-18 10:17PM  Motley Fool]
▶ Level Up: China's Online Gaming Keeps Growing   [Jan-17-18 10:44AM  Barrons.com]
▶ Should You Buy Activision Blizzard, Inc.? 3 Pros, 3 Cons   [Jan-11-18 10:10AM  InvestorPlace]
▶ New Strong Sell Stocks for January 9th   [Jan-09-18 08:26AM  Zacks]
▶ Pokemon Go to Launch in China   [Jan-02-18 01:03PM  InvestorPlace]
▶ New Strong Sell Stocks for December 27th   [Dec-27-17 09:32AM  Zacks]
▶ Breaking Down NetEases e-Commerce Push   [Dec-22-17 09:00AM  Market Realist]
▶ Qualcomm: Hold or Sell?   [Dec-18-17 04:01PM  GuruFocus.com]
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