Intrinsic value of PayPal Holdings - PYPL

Previous Close

$84.78

  Intrinsic Value

$103.67

stock screener

  Rating & Target

buy

+22%

Previous close

$84.78

 
Intrinsic value

$103.67

 
Up/down potential

+22%

 
Rating

buy

We calculate the intrinsic value of PYPL 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 0001), $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 100.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
  5.85
Revenue, $m
  16,106
  19,520
  23,342
  27,572
  32,207
  37,240
  42,665
  48,471
  54,651
  61,194
  68,095
  75,346
  82,943
  90,885
  99,172
  107,806
  116,792
  126,138
  135,853
  145,949
  156,440
  167,343
  178,677
  190,461
  202,719
  215,474
  228,754
  242,586
  257,000
  272,029
Variable operating expenses, $m
  12,137
  14,614
  17,387
  20,456
  23,819
  27,472
  31,407
  35,620
  40,104
  44,852
  49,408
  54,669
  60,182
  65,945
  71,957
  78,222
  84,742
  91,523
  98,572
  105,897
  113,510
  121,421
  129,644
  138,195
  147,089
  156,344
  165,979
  176,015
  186,474
  197,379
Fixed operating expenses, $m
  1,064
  1,087
  1,111
  1,136
  1,161
  1,186
  1,212
  1,239
  1,266
  1,294
  1,323
  1,352
  1,381
  1,412
  1,443
  1,475
  1,507
  1,540
  1,574
  1,609
  1,644
  1,680
  1,717
  1,755
  1,794
  1,833
  1,873
  1,915
  1,957
  2,000
Total operating expenses, $m
  13,201
  15,701
  18,498
  21,592
  24,980
  28,658
  32,619
  36,859
  41,370
  46,146
  50,731
  56,021
  61,563
  67,357
  73,400
  79,697
  86,249
  93,063
  100,146
  107,506
  115,154
  123,101
  131,361
  139,950
  148,883
  158,177
  167,852
  177,930
  188,431
  199,379
Operating income, $m
  2,905
  3,819
  4,844
  5,980
  7,227
  8,583
  10,045
  11,612
  13,280
  15,048
  17,364
  19,325
  21,380
  23,529
  25,772
  28,110
  30,543
  33,075
  35,707
  38,443
  41,286
  44,242
  47,315
  50,511
  53,837
  57,297
  60,901
  64,656
  68,569
  72,651
EBITDA, $m
  3,980
  5,026
  6,199
  7,500
  8,926
  10,477
  12,150
  13,942
  15,850
  17,871
  20,004
  22,246
  24,595
  27,052
  29,617
  32,289
  35,071
  37,965
  40,973
  44,101
  47,351
  50,730
  54,242
  57,895
  61,695
  65,651
  69,769
  74,060
  78,533
  83,196
Interest expense (income), $m
  4
  54
  363
  712
  1,103
  1,536
  2,010
  2,525
  3,080
  3,674
  4,306
  4,975
  5,681
  6,422
  7,199
  8,012
  8,859
  9,742
  10,661
  11,617
  12,611
  13,644
  14,717
  15,832
  16,991
  18,196
  19,450
  20,755
  22,113
  23,528
  25,002
Earnings before tax, $m
  2,851
  3,456
  4,131
  4,877
  5,691
  6,573
  7,520
  8,532
  9,607
  10,743
  12,389
  13,644
  14,958
  16,330
  17,760
  19,250
  20,801
  22,413
  24,089
  25,832
  27,643
  29,526
  31,484
  33,520
  35,640
  37,847
  40,147
  42,543
  45,042
  47,649
Tax expense, $m
  770
  933
  1,115
  1,317
  1,537
  1,775
  2,030
  2,304
  2,594
  2,901
  3,345
  3,684
  4,039
  4,409
  4,795
  5,198
  5,616
  6,052
  6,504
  6,975
  7,464
  7,972
  8,501
  9,051
  9,623
  10,219
  10,840
  11,487
  12,161
  12,865
Net income, $m
  2,081
  2,523
  3,016
  3,560
  4,154
  4,798
  5,490
  6,228
  7,013
  7,842
  9,044
  9,960
  10,919
  11,921
  12,965
  14,053
  15,185
  16,362
  17,585
  18,857
  20,179
  21,554
  22,983
  24,470
  26,017
  27,629
  29,307
  31,056
  32,880
  34,784

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
  50,173
  60,810
  72,717
  85,894
  100,333
  116,014
  132,912
  151,001
  170,251
  190,636
  212,133
  234,722
  258,391
  283,132
  308,948
  335,845
  363,839
  392,953
  423,217
  454,669
  487,352
  521,318
  556,625
  593,336
  631,522
  671,259
  712,629
  755,719
  800,624
  847,443
Adjusted assets (=assets-cash), $m
  50,173
  60,810
  72,717
  85,894
  100,333
  116,014
  132,912
  151,001
  170,251
  190,636
  212,133
  234,722
  258,391
  283,132
  308,948
  335,845
  363,839
  392,953
  423,217
  454,669
  487,352
  521,318
  556,625
  593,336
  631,522
  671,259
  712,629
  755,719
  800,624
  847,443
Revenue / Adjusted assets
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
  0.321
Average production assets, $m
  4,558
  5,524
  6,606
  7,803
  9,115
  10,539
  12,074
  13,717
  15,466
  17,318
  19,271
  21,323
  23,473
  25,721
  28,066
  30,509
  33,052
  35,697
  38,446
  41,303
  44,273
  47,358
  50,565
  53,900
  57,369
  60,979
  64,737
  68,652
  72,731
  76,984
Working capital, $m
  -3,221
  -3,904
  -4,668
  -5,514
  -6,441
  -7,448
  -8,533
  -9,694
  -10,930
  -12,239
  -13,619
  -15,069
  -16,589
  -18,177
  -19,834
  -21,561
  -23,358
  -25,228
  -27,171
  -29,190
  -31,288
  -33,469
  -35,735
  -38,092
  -40,544
  -43,095
  -45,751
  -48,517
  -51,400
  -54,406
Total debt, $m
  6,725
  13,192
  20,432
  28,444
  37,222
  46,756
  57,031
  68,029
  79,733
  92,127
  105,197
  118,931
  133,321
  148,364
  164,060
  180,414
  197,434
  215,136
  233,536
  252,659
  272,530
  293,182
  314,648
  336,968
  360,186
  384,345
  409,498
  435,697
  462,999
  491,465
Total liabilities, $m
  30,505
  36,972
  44,212
  52,224
  61,002
  70,536
  80,811
  91,809
  103,513
  115,907
  128,977
  142,711
  157,101
  172,144
  187,840
  204,194
  221,214
  238,916
  257,316
  276,439
  296,310
  316,962
  338,428
  360,748
  383,966
  408,125
  433,278
  459,477
  486,779
  515,245
Total equity, $m
  19,668
  23,838
  28,505
  33,671
  39,331
  45,477
  52,102
  59,192
  66,738
  74,729
  83,156
  92,011
  101,289
  110,988
  121,108
  131,651
  142,625
  154,038
  165,901
  178,230
  191,042
  204,357
  218,197
  232,588
  247,557
  263,134
  279,350
  296,242
  313,845
  332,198
Total liabilities and equity, $m
  50,173
  60,810
  72,717
  85,895
  100,333
  116,013
  132,913
  151,001
  170,251
  190,636
  212,133
  234,722
  258,390
  283,132
  308,948
  335,845
  363,839
  392,954
  423,217
  454,669
  487,352
  521,319
  556,625
  593,336
  631,523
  671,259
  712,628
  755,719
  800,624
  847,443
Debt-to-equity ratio
  0.340
  0.550
  0.720
  0.840
  0.950
  1.030
  1.090
  1.150
  1.190
  1.230
  1.270
  1.290
  1.320
  1.340
  1.350
  1.370
  1.380
  1.400
  1.410
  1.420
  1.430
  1.430
  1.440
  1.450
  1.450
  1.460
  1.470
  1.470
  1.480
  1.480
Adjusted equity ratio
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392
  0.392

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,081
  2,523
  3,016
  3,560
  4,154
  4,798
  5,490
  6,228
  7,013
  7,842
  9,044
  9,960
  10,919
  11,921
  12,965
  14,053
  15,185
  16,362
  17,585
  18,857
  20,179
  21,554
  22,983
  24,470
  26,017
  27,629
  29,307
  31,056
  32,880
  34,784
Depreciation, amort., depletion, $m
  1,075
  1,207
  1,356
  1,520
  1,699
  1,894
  2,105
  2,330
  2,569
  2,823
  2,640
  2,921
  3,215
  3,523
  3,845
  4,179
  4,528
  4,890
  5,267
  5,658
  6,065
  6,487
  6,927
  7,384
  7,859
  8,353
  8,868
  9,404
  9,963
  10,546
Funds from operations, $m
  3,156
  3,730
  4,371
  5,080
  5,854
  6,692
  7,594
  8,558
  9,582
  10,665
  11,684
  12,881
  14,135
  15,444
  16,810
  18,232
  19,712
  21,252
  22,852
  24,515
  26,244
  28,041
  29,910
  31,854
  33,876
  35,982
  38,175
  40,461
  42,844
  45,329
Change in working capital, $m
  -602
  -683
  -764
  -846
  -927
  -1,007
  -1,085
  -1,161
  -1,236
  -1,309
  -1,380
  -1,450
  -1,520
  -1,588
  -1,657
  -1,727
  -1,797
  -1,869
  -1,943
  -2,019
  -2,098
  -2,181
  -2,267
  -2,357
  -2,452
  -2,551
  -2,656
  -2,766
  -2,883
  -3,006
Cash from operations, $m
  3,759
  4,413
  5,136
  5,926
  6,781
  7,699
  8,679
  9,720
  10,818
  11,974
  13,064
  14,331
  15,654
  17,032
  18,467
  19,959
  21,510
  23,121
  24,795
  26,534
  28,342
  30,222
  32,176
  34,210
  36,328
  38,533
  40,831
  43,227
  45,727
  48,335
Maintenance CAPEX, $m
  -507
  -624
  -757
  -905
  -1,069
  -1,249
  -1,444
  -1,654
  -1,879
  -2,119
  -2,372
  -2,640
  -2,921
  -3,215
  -3,523
  -3,845
  -4,179
  -4,528
  -4,890
  -5,267
  -5,658
  -6,065
  -6,487
  -6,927
  -7,384
  -7,859
  -8,353
  -8,868
  -9,404
  -9,963
New CAPEX, $m
  -859
  -966
  -1,082
  -1,197
  -1,312
  -1,424
  -1,535
  -1,643
  -1,749
  -1,852
  -1,953
  -2,052
  -2,150
  -2,248
  -2,345
  -2,443
  -2,543
  -2,645
  -2,749
  -2,857
  -2,969
  -3,086
  -3,207
  -3,335
  -3,469
  -3,610
  -3,758
  -3,914
  -4,079
  -4,253
Cash from investing activities, $m
  -1,366
  -1,590
  -1,839
  -2,102
  -2,381
  -2,673
  -2,979
  -3,297
  -3,628
  -3,971
  -4,325
  -4,692
  -5,071
  -5,463
  -5,868
  -6,288
  -6,722
  -7,173
  -7,639
  -8,124
  -8,627
  -9,151
  -9,694
  -10,262
  -10,853
  -11,469
  -12,111
  -12,782
  -13,483
  -14,216
Free cash flow, $m
  2,393
  2,822
  3,297
  3,824
  4,400
  5,026
  5,701
  6,422
  7,190
  8,003
  8,739
  9,639
  10,583
  11,569
  12,599
  13,671
  14,787
  15,948
  17,156
  18,411
  19,715
  21,071
  22,482
  23,949
  25,475
  27,064
  28,720
  30,445
  32,243
  34,119
Issuance/(repayment) of debt, $m
  5,725
  6,467
  7,239
  8,012
  8,779
  9,534
  10,274
  10,998
  11,704
  12,394
  13,070
  13,734
  14,391
  15,043
  15,696
  16,353
  17,020
  17,701
  18,401
  19,123
  19,871
  20,651
  21,466
  22,320
  23,217
  24,160
  25,153
  26,199
  27,302
  28,466
Issuance/(repurchase) of shares, $m
  1,593
  1,647
  1,652
  1,606
  1,506
  1,349
  1,134
  862
  533
  149
  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  
  7,318
  8,114
  8,891
  9,618
  10,285
  10,883
  11,408
  11,860
  12,237
  12,543
  13,070
  13,734
  14,391
  15,043
  15,696
  16,353
  17,020
  17,701
  18,401
  19,123
  19,871
  20,651
  21,466
  22,320
  23,217
  24,160
  25,153
  26,199
  27,302
  28,466
Total cash flow (excl. dividends), $m
  9,711
  10,936
  12,188
  13,441
  14,684
  15,909
  17,109
  18,282
  19,428
  20,546
  21,809
  23,374
  24,974
  26,612
  28,294
  30,024
  31,808
  33,650
  35,556
  37,533
  39,587
  41,723
  43,948
  46,269
  48,692
  51,224
  53,872
  56,644
  59,545
  62,585
Retained Cash Flow (-), $m
  -3,674
  -4,170
  -4,667
  -5,166
  -5,660
  -6,147
  -6,624
  -7,091
  -7,546
  -7,991
  -8,427
  -8,855
  -9,278
  -9,699
  -10,120
  -10,544
  -10,974
  -11,413
  -11,864
  -12,329
  -12,812
  -13,315
  -13,840
  -14,391
  -14,969
  -15,577
  -16,217
  -16,891
  -17,603
  -18,353
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
  6,037
  6,767
  7,521
  8,276
  9,024
  9,762
  10,485
  11,192
  11,881
  12,555
  13,382
  14,519
  15,696
  16,914
  18,175
  19,481
  20,834
  22,237
  23,693
  25,204
  26,775
  28,408
  30,108
  31,878
  33,723
  35,648
  37,656
  39,752
  41,942
  44,232
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
  5,788
  6,195
  6,545
  6,814
  6,995
  7,085
  7,084
  6,995
  6,825
  6,582
  6,355
  6,196
  5,968
  5,678
  5,336
  4,950
  4,533
  4,095
  3,648
  3,203
  2,769
  2,357
  1,973
  1,624
  1,312
  1,040
  808
  615
  458
  333
Current shareholders' claim on cash, %
  98.4
  97.1
  96.1
  95.2
  94.6
  94.1
  93.7
  93.4
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3
  93.3

PayPal Holdings, Inc. is a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. The Company's combined payment solutions, including its PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products, compose its Payments Platform. It operates a two-sided global technology platform that links its customers, both merchants and consumers, around the globe to facilitate the processing of payment transactions, allowing it to connect merchants and consumers. It allows its customers to use their account for both purchase and paying for goods, as well as to transfer and withdraw funds. It enables consumers to exchange funds with merchants using funding sources, which include bank account, PayPal account balance, PayPal Credit account, credit and debit card or other stored value products. It offers consumers person-to-person payment solutions through its PayPal Website and mobile application, Venmo and Xoom.

FINANCIAL RATIOS  of  PayPal Holdings (PYPL)

Valuation Ratios
P/E Ratio 73
Price to Sales 9.4
Price to Book 7
Price to Tangible Book
Price to Cash Flow 32.4
Price to Free Cash Flow 41.1
Growth Rates
Sales Growth Rate 17.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -7.3%
Cap. Spend. - 3 Yr. Gr. Rate 11.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 409
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 8.4%
Return On Equity 9.8%
Return On Equity - 3 Yr. Avg. 8.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 47.4%
Gross Margin - 3 Yr. Avg. 50.3%
EBITDA Margin 21.8%
EBITDA Margin - 3 Yr. Avg. 22.3%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 15.4%
Pre-Tax Margin 15%
Pre-Tax Margin - 3 Yr. Avg. 15.6%
Net Profit Margin 12.9%
Net Profit Margin - 3 Yr. Avg. 10.5%
Effective Tax Rate 14.1%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 0%

PYPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PYPL stock intrinsic value calculation we used $13094 million for the last fiscal year's total revenue generated by PayPal Holdings. The default revenue input number comes from 0001 income statement of PayPal Holdings. 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 PYPL stock valuation model: a) initial revenue growth rate of 23% 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 PYPL is calculated based on our internal credit rating of PayPal Holdings, 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 PayPal Holdings.
    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 PYPL stock the variable cost ratio is equal to 76%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1041 million in the base year in the intrinsic value calculation for PYPL 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 PayPal Holdings.

Corporate tax rate of 27% is the nominal tax rate for PayPal Holdings. 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 PYPL 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 PYPL are equal to 28.3%.

Life of production assets of 7.3 years is the average useful life of capital assets used in PayPal Holdings 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 PYPL is equal to -20%. 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 - $15994 million for PayPal Holdings - 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 1187.39 million for PayPal Holdings 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 PayPal Holdings at the current share price and the inputted number of shares is $100.7 billion.

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