Intrinsic value of Koninklijke Philips ADR - PHG

Previous Close

$42.37

  Intrinsic Value

$32.66

stock screener

  Rating & Target

sell

-23%

Previous close

$42.37

 
Intrinsic value

$32.66

 
Up/down potential

-23%

 
Rating

sell

We calculate the intrinsic value of PHG 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 2017), $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 39.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.40
  15.26
  14.23
  13.31
  12.48
  11.73
  11.06
  10.45
  9.91
  9.42
  8.97
  8.58
  8.22
  7.90
  7.61
  7.35
  7.11
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
Revenue, $m
  24,846
  28,637
  32,713
  37,068
  41,693
  46,585
  51,736
  57,144
  62,805
  68,720
  74,887
  81,310
  87,994
  94,943
  102,167
  109,673
  117,474
  125,581
  134,008
  142,773
  151,890
  161,379
  171,260
  181,553
  192,282
  203,469
  215,142
  227,325
  240,047
  253,339
Variable operating expenses, $m
  22,292
  25,492
  28,931
  32,606
  36,509
  40,637
  44,984
  49,547
  54,324
  59,315
  63,192
  68,613
  74,252
  80,117
  86,212
  92,546
  99,128
  105,969
  113,081
  120,477
  128,170
  136,177
  144,515
  153,201
  162,254
  171,695
  181,544
  191,825
  202,561
  213,776
Fixed operating expenses, $m
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  249
  255
  261
  266
  272
  278
  284
  291
  297
  303
  310
  317
  324
  331
  338
  346
Total operating expenses, $m
  22,476
  25,680
  29,123
  32,802
  36,710
  40,842
  45,194
  49,761
  54,543
  59,539
  63,421
  68,847
  74,491
  80,361
  86,461
  92,801
  99,389
  106,235
  113,353
  120,755
  128,454
  136,468
  144,812
  153,504
  162,564
  172,012
  181,868
  192,156
  202,899
  214,122
Operating income, $m
  2,369
  2,957
  3,590
  4,265
  4,983
  5,743
  6,543
  7,383
  8,262
  9,181
  11,466
  12,464
  13,503
  14,583
  15,705
  16,872
  18,085
  19,345
  20,655
  22,018
  23,436
  24,911
  26,448
  28,049
  29,717
  31,458
  33,274
  35,169
  37,149
  39,217
EBITDA, $m
  5,475
  6,334
  7,259
  8,246
  9,296
  10,405
  11,574
  12,801
  14,086
  15,428
  16,828
  18,286
  19,803
  21,381
  23,020
  24,725
  26,496
  28,336
  30,250
  32,240
  34,311
  36,466
  38,710
  41,048
  43,485
  46,026
  48,678
  51,445
  54,336
  57,356
Interest expense (income), $m
  328
  311
  456
  612
  780
  960
  1,150
  1,352
  1,564
  1,787
  2,020
  2,264
  2,518
  2,783
  3,059
  3,345
  3,643
  3,952
  4,273
  4,607
  4,955
  5,316
  5,692
  6,083
  6,490
  6,914
  7,356
  7,817
  8,298
  8,800
  9,325
Earnings before tax, $m
  2,058
  2,501
  2,977
  3,485
  4,024
  4,592
  5,191
  5,818
  6,475
  7,160
  9,202
  9,946
  10,720
  11,524
  12,360
  13,229
  14,133
  15,072
  16,048
  17,063
  18,120
  19,219
  20,365
  21,559
  22,803
  24,101
  25,456
  26,871
  28,348
  29,892
Tax expense, $m
  556
  675
  804
  941
  1,086
  1,240
  1,402
  1,571
  1,748
  1,933
  2,484
  2,685
  2,894
  3,112
  3,337
  3,572
  3,816
  4,069
  4,333
  4,607
  4,892
  5,189
  5,499
  5,821
  6,157
  6,507
  6,873
  7,255
  7,654
  8,071
Net income, $m
  1,502
  1,826
  2,173
  2,544
  2,937
  3,352
  3,789
  4,247
  4,727
  5,227
  6,717
  7,260
  7,825
  8,413
  9,023
  9,658
  10,317
  11,002
  11,715
  12,456
  13,227
  14,030
  14,866
  15,738
  16,646
  17,594
  18,583
  19,616
  20,694
  21,821

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
  35,393
  40,793
  46,600
  52,803
  59,392
  66,360
  73,698
  81,402
  89,466
  97,891
  106,677
  115,827
  125,348
  135,247
  145,537
  156,230
  167,341
  178,890
  190,895
  203,380
  216,367
  229,885
  243,960
  258,623
  273,906
  289,843
  306,470
  323,825
  341,948
  360,881
Adjusted assets (=assets-cash), $m
  35,393
  40,793
  46,600
  52,803
  59,392
  66,360
  73,698
  81,402
  89,466
  97,891
  106,677
  115,827
  125,348
  135,247
  145,537
  156,230
  167,341
  178,890
  190,895
  203,380
  216,367
  229,885
  243,960
  258,623
  273,906
  289,843
  306,470
  323,825
  341,948
  360,881
Revenue / Adjusted assets
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
  0.702
Average production assets, $m
  17,789
  20,504
  23,423
  26,540
  29,852
  33,355
  37,043
  40,915
  44,969
  49,203
  53,619
  58,218
  63,004
  67,980
  73,151
  78,526
  84,111
  89,916
  95,950
  102,225
  108,753
  115,547
  122,622
  129,992
  137,674
  145,684
  154,041
  162,765
  171,874
  181,390
Working capital, $m
  373
  430
  491
  556
  625
  699
  776
  857
  942
  1,031
  1,123
  1,220
  1,320
  1,424
  1,533
  1,645
  1,762
  1,884
  2,010
  2,142
  2,278
  2,421
  2,569
  2,723
  2,884
  3,052
  3,227
  3,410
  3,601
  3,800
Total debt, $m
  8,293
  11,134
  14,188
  17,451
  20,917
  24,582
  28,442
  32,494
  36,736
  41,167
  45,788
  50,601
  55,609
  60,816
  66,229
  71,853
  77,698
  83,772
  90,087
  96,654
  103,486
  110,596
  117,999
  125,712
  133,751
  142,133
  150,879
  160,008
  169,541
  179,500
Total liabilities, $m
  18,616
  21,457
  24,512
  27,774
  31,240
  34,905
  38,765
  42,817
  47,059
  51,491
  56,112
  60,925
  65,933
  71,140
  76,552
  82,177
  88,021
  94,096
  100,411
  106,978
  113,809
  120,919
  128,323
  136,036
  144,074
  152,457
  161,203
  170,332
  179,865
  189,824
Total equity, $m
  16,776
  19,336
  22,088
  25,029
  28,152
  31,455
  34,933
  38,584
  42,407
  46,400
  50,565
  54,902
  59,415
  64,107
  68,984
  74,053
  79,320
  84,794
  90,484
  96,402
  102,558
  108,965
  115,637
  122,587
  129,831
  137,385
  145,267
  153,493
  162,083
  171,058
Total liabilities and equity, $m
  35,392
  40,793
  46,600
  52,803
  59,392
  66,360
  73,698
  81,401
  89,466
  97,891
  106,677
  115,827
  125,348
  135,247
  145,536
  156,230
  167,341
  178,890
  190,895
  203,380
  216,367
  229,884
  243,960
  258,623
  273,905
  289,842
  306,470
  323,825
  341,948
  360,882
Debt-to-equity ratio
  0.490
  0.580
  0.640
  0.700
  0.740
  0.780
  0.810
  0.840
  0.870
  0.890
  0.910
  0.920
  0.940
  0.950
  0.960
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
  1.030
  1.030
  1.030
  1.040
  1.040
  1.050
  1.050
Adjusted equity ratio
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,502
  1,826
  2,173
  2,544
  2,937
  3,352
  3,789
  4,247
  4,727
  5,227
  6,717
  7,260
  7,825
  8,413
  9,023
  9,658
  10,317
  11,002
  11,715
  12,456
  13,227
  14,030
  14,866
  15,738
  16,646
  17,594
  18,583
  19,616
  20,694
  21,821
Depreciation, amort., depletion, $m
  3,106
  3,377
  3,669
  3,981
  4,312
  4,662
  5,031
  5,418
  5,824
  6,247
  5,362
  5,822
  6,300
  6,798
  7,315
  7,853
  8,411
  8,992
  9,595
  10,223
  10,875
  11,555
  12,262
  12,999
  13,767
  14,568
  15,404
  16,276
  17,187
  18,139
Funds from operations, $m
  4,608
  5,203
  5,843
  6,525
  7,249
  8,015
  8,821
  9,666
  10,551
  11,474
  12,079
  13,082
  14,126
  15,211
  16,338
  17,510
  18,728
  19,994
  21,310
  22,679
  24,103
  25,585
  27,129
  28,737
  30,414
  32,162
  33,987
  35,892
  37,881
  39,960
Change in working capital, $m
  53
  57
  61
  65
  69
  73
  77
  81
  85
  89
  93
  96
  100
  104
  108
  113
  117
  122
  126
  131
  137
  142
  148
  154
  161
  168
  175
  183
  191
  199
Cash from operations, $m
  4,555
  5,146
  5,781
  6,460
  7,180
  7,941
  8,743
  9,585
  10,466
  11,386
  11,987
  12,986
  14,025
  15,106
  16,230
  17,398
  18,611
  19,872
  21,183
  22,547
  23,966
  25,443
  26,980
  28,583
  30,253
  31,995
  33,812
  35,709
  37,691
  39,761
Maintenance CAPEX, $m
  -1,528
  -1,779
  -2,050
  -2,342
  -2,654
  -2,985
  -3,335
  -3,704
  -4,092
  -4,497
  -4,920
  -5,362
  -5,822
  -6,300
  -6,798
  -7,315
  -7,853
  -8,411
  -8,992
  -9,595
  -10,223
  -10,875
  -11,555
  -12,262
  -12,999
  -13,767
  -14,568
  -15,404
  -16,276
  -17,187
New CAPEX, $m
  -2,513
  -2,715
  -2,919
  -3,118
  -3,312
  -3,502
  -3,688
  -3,872
  -4,054
  -4,235
  -4,416
  -4,599
  -4,785
  -4,976
  -5,172
  -5,375
  -5,585
  -5,805
  -6,034
  -6,275
  -6,528
  -6,794
  -7,075
  -7,370
  -7,682
  -8,010
  -8,357
  -8,723
  -9,109
  -9,517
Cash from investing activities, $m
  -4,041
  -4,494
  -4,969
  -5,460
  -5,966
  -6,487
  -7,023
  -7,576
  -8,146
  -8,732
  -9,336
  -9,961
  -10,607
  -11,276
  -11,970
  -12,690
  -13,438
  -14,216
  -15,026
  -15,870
  -16,751
  -17,669
  -18,630
  -19,632
  -20,681
  -21,777
  -22,925
  -24,127
  -25,385
  -26,704
Free cash flow, $m
  515
  653
  812
  1,000
  1,214
  1,454
  1,719
  2,008
  2,320
  2,654
  2,650
  3,025
  3,418
  3,830
  4,260
  4,708
  5,173
  5,656
  6,158
  6,677
  7,215
  7,773
  8,351
  8,950
  9,572
  10,217
  10,886
  11,582
  12,305
  13,057
Issuance/(repayment) of debt, $m
  2,631
  2,841
  3,054
  3,263
  3,466
  3,665
  3,860
  4,052
  4,242
  4,431
  4,621
  4,813
  5,008
  5,207
  5,412
  5,624
  5,845
  6,075
  6,315
  6,567
  6,832
  7,110
  7,403
  7,713
  8,039
  8,383
  8,746
  9,129
  9,533
  9,959
Issuance/(repurchase) of shares, $m
  869
  734
  579
  396
  186
  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  
  3,500
  3,575
  3,633
  3,659
  3,652
  3,665
  3,860
  4,052
  4,242
  4,431
  4,621
  4,813
  5,008
  5,207
  5,412
  5,624
  5,845
  6,075
  6,315
  6,567
  6,832
  7,110
  7,403
  7,713
  8,039
  8,383
  8,746
  9,129
  9,533
  9,959
Total cash flow (excl. dividends), $m
  4,015
  4,228
  4,446
  4,658
  4,866
  5,119
  5,579
  6,060
  6,563
  7,086
  7,272
  7,838
  8,426
  9,037
  9,672
  10,332
  11,018
  11,731
  12,472
  13,244
  14,047
  14,883
  15,755
  16,663
  17,611
  18,600
  19,632
  20,711
  21,838
  23,016
Retained Cash Flow (-), $m
  -2,371
  -2,560
  -2,752
  -2,940
  -3,123
  -3,303
  -3,478
  -3,651
  -3,823
  -3,993
  -4,164
  -4,337
  -4,513
  -4,692
  -4,877
  -5,068
  -5,267
  -5,474
  -5,691
  -5,918
  -6,156
  -6,407
  -6,672
  -6,950
  -7,244
  -7,554
  -7,881
  -8,226
  -8,590
  -8,974
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
  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
  1,644
  1,668
  1,693
  1,718
  1,743
  1,816
  2,101
  2,409
  2,740
  3,092
  3,107
  3,501
  3,913
  4,345
  4,795
  5,264
  5,751
  6,257
  6,782
  7,326
  7,891
  8,476
  9,083
  9,713
  10,367
  11,046
  11,751
  12,484
  13,247
  14,041
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
  1,576
  1,527
  1,474
  1,415
  1,351
  1,318
  1,419
  1,506
  1,574
  1,621
  1,476
  1,494
  1,488
  1,459
  1,408
  1,338
  1,251
  1,152
  1,044
  931
  816
  703
  595
  495
  403
  322
  252
  193
  145
  106
Current shareholders' claim on cash, %
  97.8
  96.3
  95.3
  94.6
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4
  94.4

Koninklijke Philips N.V. is the Netherlands-based health technology company. The Company's segments include Personal Health businesses, Diagnosis & Treatment businesses, Connected Care & Health Informatics businesses, HealthTech Other and Legacy Items. The Personal Health businesses segment is engaged in the health continuum, delivering integrated, connected solutions that support healthier lifestyles and those living with chronic disease. The Diagnosis & Treatment businesses segment delivers precision medicine and treatment, and therapy. The Connected Care & Health Informatics businesses segment provides consumers, care givers and clinicians with digital solutions that facilitate care by enabling precision medicine and population health management. The HealthTech Other segment comprises such items, as innovation, emerging businesses, royalties, among others. The Legacy Items segment consists mainly of separation costs, legacy legal items, legacy pension costs, among others.

FINANCIAL RATIOS  of  Koninklijke Philips ADR (PHG)

Valuation Ratios
P/E Ratio 25.6
Price to Sales 1.5
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 28.4
Growth Rates
Sales Growth Rate 1.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.2%
Cap. Spend. - 3 Yr. Gr. Rate 0.3%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 31.9%
Total Debt to Equity 44.5%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.3%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 8.1%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 11.9%
Return On Equity - 3 Yr. Avg. 7.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 43.3%
Gross Margin - 3 Yr. Avg. 40.8%
EBITDA Margin 12.1%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 7.6%
Oper. Margin - 3 Yr. Avg. 4.6%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin 5.9%
Net Profit Margin - 3 Yr. Avg. 3.5%
Effective Tax Rate 23.5%
Eff/ Tax Rate - 3 Yr. Avg. 25.3%
Payout Ratio 22.8%

PHG stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PHG stock intrinsic value calculation we used $21345 million for the last fiscal year's total revenue generated by Koninklijke Philips ADR. The default revenue input number comes from 2017 income statement of Koninklijke Philips 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 PHG stock valuation model: a) initial revenue growth rate of 16.4% 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 PHG is calculated based on our internal credit rating of Koninklijke Philips 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 Koninklijke Philips 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 PHG stock the variable cost ratio is equal to 90.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $180 million in the base year in the intrinsic value calculation for PHG 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 5.5% for Koninklijke Philips ADR.

Corporate tax rate of 27% is the nominal tax rate for Koninklijke Philips 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 PHG 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 PHG are equal to 71.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Koninklijke Philips 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 PHG is equal to 1.5%. 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 - $14405 million for Koninklijke Philips 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 930 million for Koninklijke Philips 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 Koninklijke Philips ADR at the current share price and the inputted number of shares is $39.4 billion.

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COMPANY NEWS

▶ How Much Money Does Koninklijke Philips NV (AMS:PHIA) Make?   [Aug-16-18 09:46AM  Simply Wall St.]
▶ Philips now eyes 1,000-plus downtown jobs, juicing an already wild hiring spree   [Aug-09-18 03:04PM  American City Business Journals]
▶ [$$] Gibson Settles With Unsecured Creditors   [Aug-01-18 05:27PM  The Wall Street Journal]
▶ Royal Philips NV to Host Earnings Call   [Jul-23-18 08:00AM  ACCESSWIRE]
▶ Philips: 2Q Earnings Snapshot   [07:13AM  Associated Press]
▶ [$$] Philips Profit Falls   [02:14AM  The Wall Street Journal]
▶ EU's Biggest Penalties on Global Tech Companies   [Jul-20-18 07:41AM  Investopedia]
▶ [$$] Philips Complains About ' Quid Pro Quo' Payments in Gibson Bankruptcy   [Jul-19-18 02:34PM  The Wall Street Journal]
▶ Amazon Prime Day: 3 Winners, 1 Loser   [Jul-18-18 03:10PM  InvestorPlace]
▶ Brazil police search Philips office in fraud probe   [Jul-04-18 05:48PM  Associated Press]
▶ 800 health-tech jobs are heading to this downtown building   [May-14-18 01:20PM  American City Business Journals]
▶ Should You Buy Koninklijke Philips NV. (AMS:PHIA)?   [May-10-18 03:26AM  Simply Wall St.]
▶ [$$] Gibson Wins Approval to Tap Bankruptcy Financing   [May-03-18 12:34PM  The Wall Street Journal]
▶ 5 Big Takeaways From The 2018 IFA Exhibition   [Apr-26-18 11:53AM  Forbes]
▶ Philips: 1Q Earnings Snapshot   [Apr-23-18 08:37AM  Associated Press]
▶ [$$] Philips Net Income Falls   [01:49AM  The Wall Street Journal]
▶ [$$] Healthineers: A Trendy Name, a Cautious Play   [Apr-20-18 12:47PM  Barrons.com]
▶ B. Braun Will Launch its First Spinal Anesthetic at ASRA   [Apr-16-18 03:55PM  GlobeNewswire]
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