Intrinsic value of AT&T - T

Previous Close

$36.73

  Intrinsic Value

$38.64

stock screener

  Rating & Target

hold

+5%

Previous close

$36.73

 
Intrinsic value

$38.64

 
Up/down potential

+5%

 
Rating

hold

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

We calculate the intrinsic value of T 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 225.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  11.57
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  163,786
  167,062
  170,904
  175,296
  180,227
  185,691
  191,687
  198,215
  205,281
  212,894
  221,065
  229,806
  239,132
  249,063
  259,617
  270,816
  282,684
  295,247
  308,532
  322,569
  337,390
  353,029
  369,522
  386,906
  405,223
  424,514
  444,826
  466,205
  488,702
  512,369
  537,264
Variable operating expenses, $m
 
  138,618
  141,564
  144,932
  148,713
  152,902
  157,499
  162,505
  167,923
  173,761
  180,026
  176,207
  183,358
  190,973
  199,065
  207,652
  216,752
  226,385
  236,571
  247,335
  258,699
  270,691
  283,337
  296,666
  310,711
  325,503
  341,077
  357,470
  374,720
  392,867
  411,956
Fixed operating expenses, $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 operating expenses, $m
  139,439
  138,618
  141,564
  144,932
  148,713
  152,902
  157,499
  162,505
  167,923
  173,761
  180,026
  176,207
  183,358
  190,973
  199,065
  207,652
  216,752
  226,385
  236,571
  247,335
  258,699
  270,691
  283,337
  296,666
  310,711
  325,503
  341,077
  357,470
  374,720
  392,867
  411,956
Operating income, $m
  24,347
  28,444
  29,340
  30,364
  31,515
  32,789
  34,187
  35,710
  37,358
  39,134
  41,039
  53,599
  55,774
  58,090
  60,552
  63,164
  65,932
  68,862
  71,960
  75,234
  78,691
  82,339
  86,185
  90,240
  94,512
  99,011
  103,749
  108,735
  113,982
  119,502
  125,308
EBITDA, $m
  50,194
  57,354
  58,673
  60,181
  61,874
  63,749
  65,808
  68,049
  70,475
  73,088
  75,893
  78,894
  82,096
  85,505
  89,129
  92,973
  97,048
  101,361
  105,922
  110,741
  115,829
  121,198
  126,860
  132,828
  139,116
  145,739
  152,712
  160,052
  167,775
  175,901
  184,447
Interest expense (income), $m
  5,696
  5,415
  5,690
  5,987
  6,327
  6,709
  7,131
  7,595
  8,100
  8,646
  9,235
  9,867
  10,543
  11,264
  12,032
  12,848
  13,714
  14,632
  15,604
  16,631
  17,717
  18,863
  20,073
  21,348
  22,693
  24,109
  25,601
  27,172
  28,825
  30,565
  32,396
Earnings before tax, $m
  19,812
  23,028
  23,650
  24,377
  25,187
  26,080
  27,056
  28,115
  29,258
  30,487
  31,804
  43,732
  45,231
  46,826
  48,519
  50,315
  52,217
  54,229
  56,356
  58,603
  60,974
  63,475
  66,113
  68,892
  71,819
  74,902
  78,147
  81,563
  85,157
  88,937
  92,913
Tax expense, $m
  6,479
  6,218
  6,385
  6,582
  6,801
  7,042
  7,305
  7,591
  7,900
  8,232
  8,587
  11,808
  12,212
  12,643
  13,100
  13,585
  14,099
  14,642
  15,216
  15,823
  16,463
  17,138
  17,850
  18,601
  19,391
  20,224
  21,100
  22,022
  22,992
  24,013
  25,086
Net income, $m
  12,976
  16,811
  17,264
  17,795
  18,387
  19,039
  19,751
  20,524
  21,359
  22,256
  23,217
  31,924
  33,019
  34,183
  35,419
  36,730
  38,119
  39,587
  41,140
  42,780
  44,511
  46,337
  48,262
  50,291
  52,428
  54,679
  57,048
  59,541
  62,164
  64,924
  67,826

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,788
  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
  403,821
  406,476
  415,825
  426,512
  438,510
  451,804
  466,391
  482,274
  499,468
  517,991
  537,870
  559,138
  581,831
  605,992
  631,671
  658,919
  687,795
  718,361
  750,685
  784,839
  820,901
  858,952
  899,080
  941,378
  985,944
  1,032,881
  1,082,301
  1,134,318
  1,189,055
  1,246,641
  1,307,212
Adjusted assets (=assets-cash), $m
  398,033
  406,476
  415,825
  426,512
  438,510
  451,804
  466,391
  482,274
  499,468
  517,991
  537,870
  559,138
  581,831
  605,992
  631,671
  658,919
  687,795
  718,361
  750,685
  784,839
  820,901
  858,952
  899,080
  941,378
  985,944
  1,032,881
  1,082,301
  1,134,318
  1,189,055
  1,246,641
  1,307,212
Revenue / Adjusted assets
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
  0.411
Average production assets, $m
  243,460
  248,254
  253,964
  260,490
  267,818
  275,937
  284,846
  294,547
  305,048
  316,361
  328,502
  341,491
  355,351
  370,107
  385,790
  402,432
  420,068
  438,736
  458,478
  479,338
  501,362
  524,601
  549,109
  574,943
  602,161
  630,828
  661,011
  692,780
  726,211
  761,381
  798,374
Working capital, $m
  -12,207
  -8,353
  -8,545
  -8,765
  -9,011
  -9,285
  -9,584
  -9,911
  -10,264
  -10,645
  -11,053
  -11,490
  -11,957
  -12,453
  -12,981
  -13,541
  -14,134
  -14,762
  -15,427
  -16,128
  -16,870
  -17,651
  -18,476
  -19,345
  -20,261
  -21,226
  -22,241
  -23,310
  -24,435
  -25,618
  -26,863
Total debt, $m
  123,513
  123,702
  130,162
  137,547
  145,837
  155,024
  165,103
  176,079
  187,959
  200,759
  214,495
  229,191
  244,872
  261,568
  279,312
  298,140
  318,093
  339,215
  361,551
  385,151
  410,069
  436,363
  464,091
  493,319
  524,114
  556,548
  590,697
  626,641
  664,464
  704,256
  746,110
Total liabilities, $m
  280,686
  280,875
  287,335
  294,720
  303,010
  312,197
  322,276
  333,252
  345,132
  357,932
  371,668
  386,364
  402,045
  418,741
  436,485
  455,313
  475,266
  496,388
  518,724
  542,324
  567,242
  593,536
  621,264
  650,492
  681,287
  713,721
  747,870
  783,814
  821,637
  861,429
  903,283
Total equity, $m
  123,135
  125,601
  128,490
  131,792
  135,499
  139,607
  144,115
  149,023
  154,336
  160,059
  166,202
  172,773
  179,786
  187,252
  195,186
  203,606
  212,529
  221,974
  231,962
  242,515
  253,658
  265,416
  277,816
  290,886
  304,657
  319,160
  334,431
  350,504
  367,418
  385,212
  403,928
Total liabilities and equity, $m
  403,821
  406,476
  415,825
  426,512
  438,509
  451,804
  466,391
  482,275
  499,468
  517,991
  537,870
  559,137
  581,831
  605,993
  631,671
  658,919
  687,795
  718,362
  750,686
  784,839
  820,900
  858,952
  899,080
  941,378
  985,944
  1,032,881
  1,082,301
  1,134,318
  1,189,055
  1,246,641
  1,307,211
Debt-to-equity ratio
  1.003
  0.980
  1.010
  1.040
  1.080
  1.110
  1.150
  1.180
  1.220
  1.250
  1.290
  1.330
  1.360
  1.400
  1.430
  1.460
  1.500
  1.530
  1.560
  1.590
  1.620
  1.640
  1.670
  1.700
  1.720
  1.740
  1.770
  1.790
  1.810
  1.830
  1.850
Adjusted equity ratio
  0.295
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  12,976
  16,811
  17,264
  17,795
  18,387
  19,039
  19,751
  20,524
  21,359
  22,256
  23,217
  31,924
  33,019
  34,183
  35,419
  36,730
  38,119
  39,587
  41,140
  42,780
  44,511
  46,337
  48,262
  50,291
  52,428
  54,679
  57,048
  59,541
  62,164
  64,924
  67,826
Depreciation, amort., depletion, $m
  25,847
  28,910
  29,333
  29,816
  30,359
  30,961
  31,620
  32,339
  33,117
  33,955
  34,854
  25,296
  26,322
  27,415
  28,577
  29,810
  31,116
  32,499
  33,961
  35,506
  37,138
  38,859
  40,675
  42,588
  44,605
  46,728
  48,964
  51,317
  53,793
  56,399
  59,139
Funds from operations, $m
  33,908
  45,721
  46,597
  47,611
  48,746
  49,999
  51,371
  52,863
  54,475
  56,211
  58,071
  57,220
  59,341
  61,598
  63,996
  66,540
  69,235
  72,086
  75,101
  78,287
  81,649
  85,196
  88,937
  92,879
  97,033
  101,407
  106,011
  110,858
  115,958
  121,323
  126,965
Change in working capital, $m
  -5,436
  -164
  -192
  -220
  -247
  -273
  -300
  -326
  -353
  -381
  -409
  -437
  -466
  -497
  -528
  -560
  -593
  -628
  -664
  -702
  -741
  -782
  -825
  -869
  -916
  -965
  -1,016
  -1,069
  -1,125
  -1,183
  -1,245
Cash from operations, $m
  39,344
  45,884
  46,789
  47,831
  48,992
  50,272
  51,671
  53,189
  54,829
  56,591
  58,480
  57,657
  59,807
  62,095
  64,524
  67,100
  69,828
  72,715
  75,766
  78,988
  82,390
  85,978
  89,762
  93,748
  97,948
  102,371
  107,027
  111,927
  117,083
  122,506
  128,210
Maintenance CAPEX, $m
  0
  -18,034
  -18,389
  -18,812
  -19,296
  -19,838
  -20,440
  -21,100
  -21,818
  -22,596
  -23,434
  -24,333
  -25,296
  -26,322
  -27,415
  -28,577
  -29,810
  -31,116
  -32,499
  -33,961
  -35,506
  -37,138
  -38,859
  -40,675
  -42,588
  -44,605
  -46,728
  -48,964
  -51,317
  -53,793
  -56,399
New CAPEX, $m
  -21,516
  -4,794
  -5,710
  -6,527
  -7,328
  -8,119
  -8,909
  -9,701
  -10,501
  -11,313
  -12,141
  -12,989
  -13,860
  -14,757
  -15,683
  -16,642
  -17,636
  -18,668
  -19,742
  -20,859
  -22,024
  -23,239
  -24,508
  -25,833
  -27,218
  -28,667
  -30,183
  -31,769
  -33,430
  -35,170
  -36,993
Cash from investing activities, $m
  -24,215
  -22,828
  -24,099
  -25,339
  -26,624
  -27,957
  -29,349
  -30,801
  -32,319
  -33,909
  -35,575
  -37,322
  -39,156
  -41,079
  -43,098
  -45,219
  -47,446
  -49,784
  -52,241
  -54,820
  -57,530
  -60,377
  -63,367
  -66,508
  -69,806
  -73,272
  -76,911
  -80,733
  -84,747
  -88,963
  -93,392
Free cash flow, $m
  15,129
  23,056
  22,690
  22,492
  22,369
  22,315
  22,323
  22,389
  22,510
  22,682
  22,905
  20,335
  20,652
  21,016
  21,426
  21,881
  22,382
  22,930
  23,525
  24,168
  24,859
  25,601
  26,394
  27,240
  28,142
  29,100
  30,116
  31,194
  32,335
  33,542
  34,818
Issuance/(repayment) of debt, $m
  -683
  5,977
  6,460
  7,385
  8,290
  9,186
  10,079
  10,976
  11,881
  12,800
  13,736
  14,696
  15,681
  16,696
  17,744
  18,829
  19,953
  21,121
  22,336
  23,600
  24,918
  26,293
  27,728
  29,228
  30,795
  32,434
  34,149
  35,944
  37,823
  39,792
  41,854
Issuance/(repurchase) of shares, $m
  -366
  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  
  -2,665
  5,977
  6,460
  7,385
  8,290
  9,186
  10,079
  10,976
  11,881
  12,800
  13,736
  14,696
  15,681
  16,696
  17,744
  18,829
  19,953
  21,121
  22,336
  23,600
  24,918
  26,293
  27,728
  29,228
  30,795
  32,434
  34,149
  35,944
  37,823
  39,792
  41,854
Total cash flow (excl. dividends), $m
  12,464
  29,033
  29,150
  29,877
  30,660
  31,501
  32,402
  33,364
  34,390
  35,482
  36,641
  35,030
  36,333
  37,712
  39,169
  40,710
  42,336
  44,051
  45,861
  47,768
  49,778
  51,894
  54,123
  56,468
  58,937
  61,534
  64,265
  67,138
  70,158
  73,334
  76,672
Retained Cash Flow (-), $m
  -464
  -2,466
  -2,889
  -3,302
  -3,707
  -4,108
  -4,507
  -4,908
  -5,313
  -5,724
  -6,143
  -6,572
  -7,012
  -7,466
  -7,935
  -8,420
  -8,923
  -9,445
  -9,988
  -10,554
  -11,143
  -11,758
  -12,400
  -13,070
  -13,771
  -14,504
  -15,271
  -16,073
  -16,914
  -17,794
  -18,716
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
 
  26,567
  26,262
  26,574
  26,952
  27,393
  27,895
  28,456
  29,078
  29,758
  30,498
  28,459
  29,321
  30,246
  31,235
  32,290
  33,413
  34,606
  35,873
  37,215
  38,635
  40,136
  41,723
  43,398
  45,166
  47,030
  48,994
  51,064
  53,245
  55,540
  57,956
Discount rate, %
 
  6.50
  6.83
  7.17
  7.52
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
PV of cash for distribution, $m
 
  24,946
  23,013
  21,592
  20,164
  18,729
  17,292
  15,859
  14,437
  13,037
  11,669
  9,407
  8,276
  7,200
  6,190
  5,253
  4,397
  3,627
  2,945
  2,352
  1,845
  1,421
  1,072
  792
  572
  404
  278
  186
  121
  77
  47
Current shareholders' claim on cash, %
  100
  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

AT&T Inc. is a holding company. The Company is a provider of communications and digital entertainment services in the United States and the world. The Company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility and International. The Company offers its services and products to consumers in the United States, Mexico and Latin America and to businesses and other providers of telecommunications services worldwide. It also owns and operates three regional TV sports networks, and retains non-controlling interests in another regional sports network and a network dedicated to game-related programming, as well as Internet interactive game playing. Its services and products include wireless communications, data/broadband and Internet services, digital video services, local and long-distance telephone services, telecommunications equipment, managed networking, and wholesale services. Its subsidiaries include AT&T Mobility and SKY Brasil Servicos Ltda.

FINANCIAL RATIOS  of  AT&T (T)

Valuation Ratios
P/E Ratio 17.4
Price to Sales 1.4
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 12.6
Growth Rates
Sales Growth Rate 11.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12%
Cap. Spend. - 3 Yr. Gr. Rate 0.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 92.3%
Total Debt to Equity 100.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 53.1%
Gross Margin - 3 Yr. Avg. 54%
EBITDA Margin 31.4%
EBITDA Margin - 3 Yr. Avg. 28.4%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 13.7%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 32.7%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 90.9%

T stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the T stock intrinsic value calculation we used $163786 million for the last fiscal year's total revenue generated by AT&T. The default revenue input number comes from 2016 income statement of AT&T. 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 T stock valuation model: a) initial revenue growth rate of 2% 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 6.5%, whose default value for T is calculated based on our internal credit rating of AT&T, 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 AT&T.
    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 T stock the variable cost ratio is equal to 83.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for T stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.6% for AT&T.

Corporate tax rate of 27% is the nominal tax rate for AT&T. 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 T 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 T are equal to 148.6%.

Life of production assets of 13.5 years is the average useful life of capital assets used in AT&T 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 T is equal to -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 - $123135 million for AT&T - 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 6140.12 million for AT&T 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 AT&T at the current share price and the inputted number of shares is $225.5 billion.

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Financial statements of T
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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