Intrinsic value of PayPal Holdings - PYPL

Previous Close

$85.45

  Intrinsic Value

$137.54

stock screener

  Rating & Target

str. buy

+61%

Previous close

$85.45

 
Intrinsic value

$137.54

 
Up/down potential

+61%

 
Rating

str. 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 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 102.8

 

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, %
  20.80
  19.22
  17.80
  16.52
  15.37
  14.33
  13.40
  12.56
  11.80
  11.12
  10.51
  9.96
  9.46
  9.02
  8.61
  8.25
  7.93
  7.63
  7.37
  7.13
  6.92
  6.73
  6.56
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
Revenue, $m
  15,818
  18,858
  22,214
  25,883
  29,861
  34,140
  38,713
  43,574
  48,717
  54,135
  59,824
  65,781
  72,006
  78,498
  85,260
  92,297
  99,614
  107,219
  115,123
  123,336
  131,872
  140,746
  149,973
  159,572
  169,561
  179,963
  190,798
  202,091
  213,866
  226,151
Variable operating expenses, $m
  11,928
  14,133
  16,569
  19,231
  22,117
  25,222
  28,540
  32,067
  35,799
  39,730
  43,407
  47,730
  52,246
  56,956
  61,863
  66,969
  72,278
  77,796
  83,531
  89,490
  95,684
  102,122
  108,817
  115,782
  123,030
  130,577
  138,439
  146,633
  155,177
  164,091
Fixed operating expenses, $m
  1,063
  1,086
  1,110
  1,135
  1,160
  1,185
  1,211
  1,238
  1,265
  1,293
  1,321
  1,350
  1,380
  1,410
  1,441
  1,473
  1,506
  1,539
  1,573
  1,607
  1,642
  1,679
  1,716
  1,753
  1,792
  1,831
  1,872
  1,913
  1,955
  1,998
Total operating expenses, $m
  12,991
  15,219
  17,679
  20,366
  23,277
  26,407
  29,751
  33,305
  37,064
  41,023
  44,728
  49,080
  53,626
  58,366
  63,304
  68,442
  73,784
  79,335
  85,104
  91,097
  97,326
  103,801
  110,533
  117,535
  124,822
  132,408
  140,311
  148,546
  157,132
  166,089
Operating income, $m
  2,827
  3,638
  4,535
  5,518
  6,584
  7,733
  8,962
  10,269
  11,653
  13,112
  15,096
  16,701
  18,380
  20,131
  21,956
  23,855
  25,830
  27,884
  30,020
  32,239
  34,546
  36,945
  39,440
  42,036
  44,739
  47,554
  50,487
  53,545
  56,734
  60,063
EBITDA, $m
  3,990
  4,937
  5,985
  7,133
  8,379
  9,720
  11,155
  12,681
  14,296
  15,999
  17,788
  19,662
  21,620
  23,663
  25,792
  28,008
  30,313
  32,709
  35,200
  37,789
  40,480
  43,278
  46,189
  49,217
  52,369
  55,652
  59,073
  62,639
  66,358
  70,239
Interest expense (income), $m
  4
  54
  334
  645
  988
  1,363
  1,770
  2,208
  2,675
  3,173
  3,699
  4,253
  4,835
  5,444
  6,081
  6,745
  7,436
  8,156
  8,904
  9,682
  10,491
  11,331
  12,204
  13,111
  14,055
  15,037
  16,059
  17,123
  18,231
  19,386
  20,590
Earnings before tax, $m
  2,773
  3,304
  3,890
  4,530
  5,221
  5,963
  6,754
  7,594
  8,481
  9,413
  10,843
  11,867
  12,936
  14,050
  15,211
  16,419
  17,674
  18,980
  20,337
  21,748
  23,215
  24,741
  26,329
  27,981
  29,702
  31,495
  33,365
  35,314
  37,349
  39,472
Tax expense, $m
  749
  892
  1,050
  1,223
  1,410
  1,610
  1,824
  2,050
  2,290
  2,542
  2,928
  3,204
  3,493
  3,794
  4,107
  4,433
  4,772
  5,125
  5,491
  5,872
  6,268
  6,680
  7,109
  7,555
  8,020
  8,504
  9,008
  9,535
  10,084
  10,658
Net income, $m
  2,024
  2,412
  2,840
  3,307
  3,811
  4,353
  4,931
  5,543
  6,191
  6,872
  7,915
  8,663
  9,443
  10,257
  11,104
  11,986
  12,902
  13,855
  14,846
  15,876
  16,947
  18,061
  19,220
  20,426
  21,683
  22,992
  24,356
  25,779
  27,265
  28,815

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
  49,276
  58,747
  69,202
  80,633
  93,024
  106,354
  120,602
  135,746
  151,766
  168,644
  186,367
  204,926
  224,317
  244,542
  265,608
  287,529
  310,323
  334,016
  358,638
  384,225
  410,817
  438,460
  467,205
  497,108
  528,228
  560,631
  594,386
  629,566
  666,250
  704,521
Adjusted assets (=assets-cash), $m
  49,276
  58,747
  69,202
  80,633
  93,024
  106,354
  120,602
  135,746
  151,766
  168,644
  186,367
  204,926
  224,317
  244,542
  265,608
  287,529
  310,323
  334,016
  358,638
  384,225
  410,817
  438,460
  467,205
  497,108
  528,228
  560,631
  594,386
  629,566
  666,250
  704,521
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
  7,118
  8,486
  9,996
  11,647
  13,437
  15,363
  17,421
  19,609
  21,923
  24,361
  26,921
  29,602
  32,403
  35,324
  38,367
  41,534
  44,826
  48,249
  51,805
  55,501
  59,342
  63,336
  67,488
  71,807
  76,303
  80,983
  85,859
  90,941
  96,240
  101,768
Working capital, $m
  -24,153
  -28,796
  -33,921
  -39,524
  -45,597
  -52,131
  -59,115
  -66,538
  -74,391
  -82,664
  -91,351
  -100,448
  -109,953
  -119,866
  -130,192
  -140,937
  -152,110
  -163,724
  -175,793
  -188,334
  -201,369
  -214,919
  -229,008
  -243,666
  -258,920
  -274,803
  -291,348
  -308,593
  -326,574
  -345,333
Total debt, $m
  6,180
  11,938
  18,295
  25,245
  32,779
  40,883
  49,546
  58,754
  68,494
  78,756
  89,531
  100,815
  112,605
  124,901
  137,710
  151,037
  164,897
  179,302
  194,272
  209,829
  225,997
  242,804
  260,281
  278,462
  297,383
  317,084
  337,607
  358,996
  381,300
  404,569
Total liabilities, $m
  29,960
  35,718
  42,075
  49,025
  56,559
  64,663
  73,326
  82,534
  92,274
  102,536
  113,311
  124,595
  136,385
  148,681
  161,490
  174,817
  188,677
  203,082
  218,052
  233,609
  249,777
  266,584
  284,061
  302,242
  321,163
  340,864
  361,387
  382,776
  405,080
  428,349
Total equity, $m
  19,316
  23,029
  27,127
  31,608
  36,465
  41,691
  47,276
  53,212
  59,492
  66,109
  73,056
  80,331
  87,932
  95,860
  104,118
  112,711
  121,647
  130,934
  140,586
  150,616
  161,040
  171,876
  183,144
  194,866
  207,065
  219,767
  232,999
  246,790
  261,170
  276,172
Total liabilities and equity, $m
  49,276
  58,747
  69,202
  80,633
  93,024
  106,354
  120,602
  135,746
  151,766
  168,645
  186,367
  204,926
  224,317
  244,541
  265,608
  287,528
  310,324
  334,016
  358,638
  384,225
  410,817
  438,460
  467,205
  497,108
  528,228
  560,631
  594,386
  629,566
  666,250
  704,521
Debt-to-equity ratio
  0.320
  0.520
  0.670
  0.800
  0.900
  0.980
  1.050
  1.100
  1.150
  1.190
  1.230
  1.250
  1.280
  1.300
  1.320
  1.340
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
  1.430
  1.440
  1.440
  1.450
  1.450
  1.460
  1.460
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
  2,024
  2,412
  2,840
  3,307
  3,811
  4,353
  4,931
  5,543
  6,191
  6,872
  7,915
  8,663
  9,443
  10,257
  11,104
  11,986
  12,902
  13,855
  14,846
  15,876
  16,947
  18,061
  19,220
  20,426
  21,683
  22,992
  24,356
  25,779
  27,265
  28,815
Depreciation, amort., depletion, $m
  1,162
  1,299
  1,450
  1,615
  1,794
  1,987
  2,193
  2,412
  2,643
  2,887
  2,692
  2,960
  3,240
  3,532
  3,837
  4,153
  4,483
  4,825
  5,181
  5,550
  5,934
  6,334
  6,749
  7,181
  7,630
  8,098
  8,586
  9,094
  9,624
  10,177
Funds from operations, $m
  3,187
  3,711
  4,290
  4,922
  5,606
  6,340
  7,123
  7,955
  8,834
  9,759
  10,607
  11,623
  12,683
  13,789
  14,941
  16,139
  17,385
  18,680
  20,027
  21,426
  22,881
  24,394
  25,969
  27,607
  29,313
  31,090
  32,942
  34,874
  36,889
  38,992
Change in working capital, $m
  -4,159
  -4,642
  -5,125
  -5,603
  -6,073
  -6,534
  -6,984
  -7,423
  -7,852
  -8,273
  -8,687
  -9,097
  -9,505
  -9,914
  -10,326
  -10,745
  -11,173
  -11,614
  -12,069
  -12,542
  -13,034
  -13,550
  -14,090
  -14,657
  -15,254
  -15,883
  -16,545
  -17,244
  -17,981
  -18,759
Cash from operations, $m
  7,346
  8,354
  9,415
  10,525
  11,679
  12,874
  14,107
  15,378
  16,686
  18,032
  19,295
  20,720
  22,188
  23,703
  25,267
  26,884
  28,558
  30,294
  32,096
  33,968
  35,916
  37,944
  40,059
  42,264
  44,567
  46,973
  49,488
  52,118
  54,870
  57,751
Maintenance CAPEX, $m
  -589
  -712
  -849
  -1,000
  -1,165
  -1,344
  -1,536
  -1,742
  -1,961
  -2,192
  -2,436
  -2,692
  -2,960
  -3,240
  -3,532
  -3,837
  -4,153
  -4,483
  -4,825
  -5,181
  -5,550
  -5,934
  -6,334
  -6,749
  -7,181
  -7,630
  -8,098
  -8,586
  -9,094
  -9,624
New CAPEX, $m
  -1,224
  -1,368
  -1,510
  -1,651
  -1,790
  -1,926
  -2,058
  -2,188
  -2,314
  -2,438
  -2,560
  -2,681
  -2,801
  -2,921
  -3,043
  -3,166
  -3,293
  -3,422
  -3,557
  -3,696
  -3,841
  -3,993
  -4,152
  -4,319
  -4,495
  -4,681
  -4,876
  -5,082
  -5,299
  -5,528
Cash from investing activities, $m
  -1,813
  -2,080
  -2,359
  -2,651
  -2,955
  -3,270
  -3,594
  -3,930
  -4,275
  -4,630
  -4,996
  -5,373
  -5,761
  -6,161
  -6,575
  -7,003
  -7,446
  -7,905
  -8,382
  -8,877
  -9,391
  -9,927
  -10,486
  -11,068
  -11,676
  -12,311
  -12,974
  -13,668
  -14,393
  -15,152
Free cash flow, $m
  5,532
  6,274
  7,056
  7,874
  8,725
  9,605
  10,513
  11,448
  12,411
  13,401
  14,298
  15,347
  16,427
  17,541
  18,691
  19,881
  21,112
  22,389
  23,714
  25,091
  26,524
  28,017
  29,573
  31,196
  32,891
  34,662
  36,513
  38,450
  40,477
  42,599
Issuance/(repayment) of debt, $m
  5,180
  5,758
  6,357
  6,950
  7,533
  8,105
  8,663
  9,208
  9,740
  10,262
  10,776
  11,284
  11,790
  12,297
  12,808
  13,328
  13,859
  14,405
  14,970
  15,557
  16,168
  16,807
  17,477
  18,181
  18,921
  19,701
  20,523
  21,390
  22,304
  23,269
Issuance/(repurchase) of shares, $m
  1,298
  1,300
  1,259
  1,174
  1,046
  873
  655
  393
  89
  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  
  6,478
  7,058
  7,616
  8,124
  8,579
  8,978
  9,318
  9,601
  9,829
  10,262
  10,776
  11,284
  11,790
  12,297
  12,808
  13,328
  13,859
  14,405
  14,970
  15,557
  16,168
  16,807
  17,477
  18,181
  18,921
  19,701
  20,523
  21,390
  22,304
  23,269
Total cash flow (excl. dividends), $m
  12,009
  13,333
  14,672
  15,999
  17,304
  18,582
  19,830
  21,049
  22,240
  23,663
  25,074
  26,631
  28,217
  29,838
  31,499
  33,208
  34,971
  36,794
  38,684
  40,648
  42,692
  44,824
  47,050
  49,377
  51,812
  54,363
  57,036
  59,840
  62,781
  65,867
Retained Cash Flow (-), $m
  -3,322
  -3,713
  -4,099
  -4,481
  -4,857
  -5,225
  -5,585
  -5,936
  -6,280
  -6,616
  -6,947
  -7,275
  -7,601
  -7,928
  -8,258
  -8,593
  -8,935
  -9,288
  -9,652
  -10,030
  -10,424
  -10,836
  -11,268
  -11,722
  -12,199
  -12,702
  -13,232
  -13,791
  -14,380
  -15,002
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
  733
  886
  1,056
  1,244
  1,449
  1,672
  1,912
  2,168
  2,440
  2,728
  3,032
  3,350
  3,684
  4,032
  4,396
  4,775
  5,169
  5,578
  6,004
  6,447
  6,907
  7,385
  7,882
  8,398
  8,936
  9,495
  10,078
  10,685
  11,317
  11,977
Cash available for distribution, $m
  8,687
  9,620
  10,574
  11,518
  12,447
  13,356
  14,245
  15,113
  15,961
  17,047
  18,127
  19,356
  20,615
  21,909
  23,242
  24,616
  26,036
  27,507
  29,032
  30,618
  32,268
  33,988
  35,782
  37,655
  39,613
  41,661
  43,804
  46,049
  48,401
  50,865
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
  8,329
  8,807
  9,202
  9,484
  9,648
  9,693
  9,624
  9,446
  9,169
  8,937
  8,608
  8,260
  7,838
  7,355
  6,823
  6,255
  5,665
  5,066
  4,470
  3,891
  3,338
  2,820
  2,345
  1,918
  1,541
  1,215
  940
  712
  528
  383
Current shareholders' claim on cash, %
  98.8
  97.7
  96.9
  96.3
  95.8
  95.4
  95.2
  95.1
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0
  95.0

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 73.6
Price to Sales 9.5
Price to Book 7
Price to Tangible Book
Price to Cash Flow 32.7
Price to Free Cash Flow 41.4
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 2017 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 20.8% 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 $1040 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 5.6%.

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 PYPL are equal to 45%.

Life of production assets of 10 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 -152.7%. 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 1203 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 $102.8 billion.

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COMPANY NEWS

▶ Better Buy: PayPal Holdings, Inc. vs. Discover   [Aug-19-18 09:30AM  Motley Fool]
▶ PayPal Traders Bet Stock Will Jump 7% in One Month   [Aug-17-18 06:00AM  Investopedia]
▶ Why You Should Buy Square Stock Right Now   [09:05AM  InvestorPlace]
▶ Square's Cash App Is More Popular Than Venmo   [Aug-15-18 06:04PM  Motley Fool]
▶ RH appoints new CFO   [04:19PM  MarketWatch]
▶ Square's Cash Card Is Killing It   [01:00PM  Motley Fool]
▶ [$$] Drug Deals and Breakups: Venmo Social Feed Rankles Privacy Advocates   [Aug-07-18 09:42PM  The Wall Street Journal]
▶ How Elon Musk Became Elon Musk   [03:48PM  Investopedia]
▶ What's Up With All These Share Buybacks?   [01:20PM  Motley Fool]
▶ This Tampa tech company just won PayPal's business makeover contest   [02:23PM  American City Business Journals]
▶ Better Buy: Shopify Inc. vs. PayPal   [08:07AM  Motley Fool]
▶ The Most Important Number From PayPal's 2nd Quarter   [Aug-05-18 03:03PM  Motley Fool]
▶ [$$] Where Synchrony Financial Goes After Walmart   [Aug-03-18 07:10PM  Barrons.com]
▶ 3 Reasons That Paypal Stock May Be a Screaming Buy   [Aug-02-18 10:18AM  InvestorPlace]
▶ Final Trade: PYPL, SQ & more   [Aug-01-18 06:05PM  CNBC Videos]
▶ [$$] Nobody Says Zelle Me: Banks Struggle to Catch Up to Venmo   [Jul-31-18 07:45PM  The Wall Street Journal]
▶ PayPal Is Beginning to Deploy Its Massive Cash Resources   [Jul-30-18 08:04PM  Motley Fool]
▶ 3 Reasons PayPal Stock Could Soar   [02:05PM  Motley Fool]
▶ 3 Best-Rated Tech Stocks to Beat the Market   [09:59AM  TheStreet.com]
▶ PayPal Continues Its Trek to Payments Domination   [Jul-27-18 03:42PM  Motley Fool]
▶ Paypal CFO on Earnings, Acquisitions, Venmo   [11:57AM  Bloomberg Video]
▶ PayPal's Q2 Earnings in 10 Metrics   [10:45AM  Motley Fool]
▶ Buy now, pay later options are increasing   [10:24AM  Yahoo Finance]
▶ [$$] Why PayPal Investors Felt Shortchanged   [06:00AM  The Wall Street Journal]
▶ [$$] PayPal Profit Up on Higher Usage   [09:39PM  The Wall Street Journal]
▶ Paypal: 2Q Earnings Snapshot   [04:47PM  Associated Press]
▶ Top Companies Owned by PayPal (PYPL)   [04:41PM  Investopedia]
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