Intrinsic value of Telecom Italia ADR - TI

Previous Close

$5.13

  Intrinsic Value

$2,526

stock screener

  Rating & Target

str. buy

+999%

Previous close

$5.13

 
Intrinsic value

$2,526

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of TI 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 0.1

 

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, %
  20.00
  18.50
  17.15
  15.94
  14.84
  13.86
  12.97
  12.17
  11.46
  10.81
  10.23
  9.71
  9.24
  8.81
  8.43
  8.09
  7.78
  7.50
  7.25
  7.03
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.79
  5.71
Revenue, $m
  29,317
  34,741
  40,699
  47,184
  54,187
  61,696
  69,699
  78,184
  87,142
  96,563
  106,442
  116,774
  127,560
  138,802
  150,505
  162,678
  175,334
  188,487
  202,155
  216,359
  231,122
  246,472
  262,436
  279,047
  296,338
  314,346
  333,110
  352,671
  373,073
  394,362
Variable operating expenses, $m
  22,779
  26,179
  29,914
  33,980
  38,370
  43,077
  48,094
  53,413
  59,029
  64,935
  66,727
  73,205
  79,966
  87,014
  94,350
  101,981
  109,915
  118,161
  126,729
  135,633
  144,888
  154,511
  164,519
  174,932
  185,771
  197,060
  208,823
  221,086
  233,876
  247,222
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
  22,779
  26,179
  29,914
  33,980
  38,370
  43,077
  48,094
  53,413
  59,029
  64,935
  66,727
  73,205
  79,966
  87,014
  94,350
  101,981
  109,915
  118,161
  126,729
  135,633
  144,888
  154,511
  164,519
  174,932
  185,771
  197,060
  208,823
  221,086
  233,876
  247,222
Operating income, $m
  6,538
  8,562
  10,785
  13,205
  15,817
  18,619
  21,605
  24,771
  28,113
  31,628
  39,714
  43,570
  47,594
  51,788
  56,155
  60,697
  65,419
  70,326
  75,426
  80,725
  86,234
  91,961
  97,917
  104,115
  110,566
  117,285
  124,286
  131,585
  139,197
  147,140
EBITDA, $m
  15,071
  17,859
  20,921
  24,255
  27,855
  31,715
  35,829
  40,191
  44,796
  49,639
  54,717
  60,028
  65,573
  71,351
  77,367
  83,625
  90,131
  96,892
  103,918
  111,220
  118,809
  126,699
  134,906
  143,445
  152,333
  161,590
  171,236
  181,291
  191,779
  202,723
Interest expense (income), $m
  2,434
  4,143
  5,334
  6,656
  8,108
  9,688
  11,395
  13,225
  15,175
  17,243
  19,426
  21,722
  24,129
  26,647
  29,276
  32,016
  34,868
  37,834
  40,918
  44,124
  47,455
  50,916
  54,514
  58,255
  62,145
  66,193
  70,407
  74,796
  79,368
  84,135
  89,107
Earnings before tax, $m
  2,396
  3,228
  4,129
  5,097
  6,129
  7,224
  8,380
  9,596
  10,870
  12,202
  17,992
  19,440
  20,946
  22,512
  24,139
  25,829
  27,584
  29,408
  31,302
  33,271
  35,318
  37,447
  39,663
  41,970
  44,373
  46,878
  49,491
  52,216
  55,062
  58,033
Tax expense, $m
  647
  871
  1,115
  1,376
  1,655
  1,951
  2,263
  2,591
  2,935
  3,295
  4,858
  5,249
  5,656
  6,078
  6,518
  6,974
  7,448
  7,940
  8,452
  8,983
  9,536
  10,111
  10,709
  11,332
  11,981
  12,657
  13,362
  14,098
  14,867
  15,669
Net income, $m
  1,749
  2,356
  3,014
  3,721
  4,474
  5,274
  6,118
  7,005
  7,935
  8,908
  13,134
  14,191
  15,291
  16,434
  17,622
  18,855
  20,137
  21,468
  22,850
  24,288
  25,782
  27,336
  28,954
  30,638
  32,392
  34,221
  36,128
  38,118
  40,195
  42,364

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
  99,044
  117,368
  137,496
  159,406
  183,065
  208,432
  235,470
  264,137
  294,399
  326,227
  359,601
  394,508
  430,946
  468,925
  508,462
  549,589
  592,344
  636,779
  682,955
  730,941
  780,818
  832,674
  886,608
  942,725
  1,001,141
  1,061,979
  1,125,370
  1,191,454
  1,260,380
  1,332,304
Adjusted assets (=assets-cash), $m
  99,044
  117,368
  137,496
  159,406
  183,065
  208,432
  235,470
  264,137
  294,399
  326,227
  359,601
  394,508
  430,946
  468,925
  508,462
  549,589
  592,344
  636,779
  682,955
  730,941
  780,818
  832,674
  886,608
  942,725
  1,001,141
  1,061,979
  1,125,370
  1,191,454
  1,260,380
  1,332,304
Revenue / Adjusted assets
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
  0.296
Average production assets, $m
  43,800
  51,903
  60,804
  70,493
  80,956
  92,174
  104,130
  116,808
  130,190
  144,266
  159,024
  174,461
  190,575
  207,370
  224,854
  243,041
  261,949
  281,599
  302,019
  323,240
  345,296
  368,228
  392,079
  416,896
  442,729
  469,632
  497,666
  526,890
  557,370
  589,177
Working capital, $m
  -3,313
  -3,926
  -4,599
  -5,332
  -6,123
  -6,972
  -7,876
  -8,835
  -9,847
  -10,912
  -12,028
  -13,195
  -14,414
  -15,685
  -17,007
  -18,383
  -19,813
  -21,299
  -22,843
  -24,449
  -26,117
  -27,851
  -29,655
  -31,532
  -33,486
  -35,521
  -37,641
  -39,852
  -42,157
  -44,563
Total debt, $m
  50,802
  63,390
  77,219
  92,271
  108,524
  125,952
  144,526
  164,221
  185,011
  206,877
  229,804
  253,786
  278,819
  304,910
  332,072
  360,326
  389,699
  420,226
  451,949
  484,915
  519,181
  554,806
  591,858
  630,411
  670,543
  712,338
  755,888
  801,288
  848,640
  898,052
Total liabilities, $m
  68,044
  80,632
  94,460
  109,512
  125,765
  143,193
  161,768
  181,462
  202,252
  224,118
  247,046
  271,027
  296,060
  322,151
  349,314
  377,567
  406,940
  437,467
  469,190
  502,156
  536,422
  572,047
  609,099
  647,652
  687,784
  729,579
  773,129
  818,529
  865,881
  915,293
Total equity, $m
  31,001
  36,736
  43,036
  49,894
  57,299
  65,239
  73,702
  82,675
  92,147
  102,109
  112,555
  123,481
  134,886
  146,773
  159,149
  172,021
  185,404
  199,312
  213,765
  228,785
  244,396
  260,627
  277,508
  295,073
  313,357
  332,399
  352,241
  372,925
  394,499
  417,011
Total liabilities and equity, $m
  99,045
  117,368
  137,496
  159,406
  183,064
  208,432
  235,470
  264,137
  294,399
  326,227
  359,601
  394,508
  430,946
  468,924
  508,463
  549,588
  592,344
  636,779
  682,955
  730,941
  780,818
  832,674
  886,607
  942,725
  1,001,141
  1,061,978
  1,125,370
  1,191,454
  1,260,380
  1,332,304
Debt-to-equity ratio
  1.640
  1.730
  1.790
  1.850
  1.890
  1.930
  1.960
  1.990
  2.010
  2.030
  2.040
  2.060
  2.070
  2.080
  2.090
  2.090
  2.100
  2.110
  2.110
  2.120
  2.120
  2.130
  2.130
  2.140
  2.140
  2.140
  2.150
  2.150
  2.150
  2.150
Adjusted equity ratio
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313
  0.313

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,749
  2,356
  3,014
  3,721
  4,474
  5,274
  6,118
  7,005
  7,935
  8,908
  13,134
  14,191
  15,291
  16,434
  17,622
  18,855
  20,137
  21,468
  22,850
  24,288
  25,782
  27,336
  28,954
  30,638
  32,392
  34,221
  36,128
  38,118
  40,195
  42,364
Depreciation, amort., depletion, $m
  8,532
  9,297
  10,136
  11,051
  12,038
  13,096
  14,224
  15,420
  16,682
  18,010
  15,002
  16,459
  17,979
  19,563
  21,213
  22,928
  24,712
  26,566
  28,492
  30,494
  32,575
  34,739
  36,989
  39,330
  41,767
  44,305
  46,950
  49,707
  52,582
  55,583
Funds from operations, $m
  10,281
  11,653
  13,151
  14,771
  16,512
  18,369
  20,341
  22,425
  24,618
  26,918
  28,137
  30,650
  33,270
  35,997
  38,834
  41,784
  44,849
  48,034
  51,343
  54,782
  58,357
  62,075
  65,942
  69,968
  74,159
  78,526
  83,078
  87,825
  92,777
  97,947
Change in working capital, $m
  -552
  -613
  -673
  -733
  -791
  -849
  -904
  -959
  -1,012
  -1,065
  -1,116
  -1,168
  -1,219
  -1,270
  -1,322
  -1,376
  -1,430
  -1,486
  -1,544
  -1,605
  -1,668
  -1,734
  -1,804
  -1,877
  -1,954
  -2,035
  -2,120
  -2,210
  -2,305
  -2,406
Cash from operations, $m
  10,833
  12,266
  13,824
  15,504
  17,303
  19,218
  21,246
  23,384
  25,630
  27,982
  29,253
  31,817
  34,488
  37,267
  40,157
  43,159
  46,279
  49,520
  52,887
  56,387
  60,025
  63,809
  67,746
  71,845
  76,113
  80,561
  85,198
  90,035
  95,082
  100,352
Maintenance CAPEX, $m
  -3,443
  -4,132
  -4,896
  -5,736
  -6,650
  -7,637
  -8,696
  -9,824
  -11,020
  -12,282
  -13,610
  -15,002
  -16,459
  -17,979
  -19,563
  -21,213
  -22,928
  -24,712
  -26,566
  -28,492
  -30,494
  -32,575
  -34,739
  -36,989
  -39,330
  -41,767
  -44,305
  -46,950
  -49,707
  -52,582
New CAPEX, $m
  -7,304
  -8,103
  -8,901
  -9,689
  -10,462
  -11,218
  -11,956
  -12,677
  -13,383
  -14,075
  -14,759
  -15,437
  -16,114
  -16,795
  -17,484
  -18,187
  -18,907
  -19,650
  -20,420
  -21,221
  -22,057
  -22,932
  -23,851
  -24,816
  -25,833
  -26,904
  -28,033
  -29,224
  -30,481
  -31,806
Cash from investing activities, $m
  -10,747
  -12,235
  -13,797
  -15,425
  -17,112
  -18,855
  -20,652
  -22,501
  -24,403
  -26,357
  -28,369
  -30,439
  -32,573
  -34,774
  -37,047
  -39,400
  -41,835
  -44,362
  -46,986
  -49,713
  -52,551
  -55,507
  -58,590
  -61,805
  -65,163
  -68,671
  -72,338
  -76,174
  -80,188
  -84,388
Free cash flow, $m
  86
  31
  26
  79
  190
  362
  594
  883
  1,227
  1,625
  884
  1,378
  1,916
  2,494
  3,109
  3,760
  4,443
  5,157
  5,901
  6,674
  7,474
  8,302
  9,157
  10,040
  10,950
  11,890
  12,860
  13,861
  14,895
  15,964
Issuance/(repayment) of debt, $m
  11,350
  12,588
  13,828
  15,052
  16,253
  17,428
  18,574
  19,694
  20,790
  21,866
  22,928
  23,981
  25,033
  26,091
  27,162
  28,254
  29,373
  30,527
  31,723
  32,967
  34,265
  35,625
  37,052
  38,553
  40,132
  41,796
  43,550
  45,400
  47,352
  49,412
Issuance/(repurchase) of shares, $m
  3,373
  3,379
  3,286
  3,137
  2,931
  2,667
  2,345
  1,968
  1,537
  1,055
  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  
  14,723
  15,967
  17,114
  18,189
  19,184
  20,095
  20,919
  21,662
  22,327
  22,921
  22,928
  23,981
  25,033
  26,091
  27,162
  28,254
  29,373
  30,527
  31,723
  32,967
  34,265
  35,625
  37,052
  38,553
  40,132
  41,796
  43,550
  45,400
  47,352
  49,412
Total cash flow (excl. dividends), $m
  14,809
  15,998
  17,140
  18,268
  19,375
  20,457
  21,513
  22,545
  23,554
  24,546
  23,812
  25,360
  26,949
  28,585
  30,271
  32,013
  33,816
  35,684
  37,624
  39,641
  41,740
  43,927
  46,209
  48,592
  51,082
  53,686
  56,410
  59,261
  62,247
  65,376
Retained Cash Flow (-), $m
  -5,122
  -5,735
  -6,300
  -6,858
  -7,405
  -7,940
  -8,463
  -8,973
  -9,472
  -9,962
  -10,446
  -10,926
  -11,405
  -11,887
  -12,375
  -12,873
  -13,382
  -13,908
  -14,453
  -15,020
  -15,611
  -16,231
  -16,881
  -17,565
  -18,284
  -19,042
  -19,841
  -20,684
  -21,574
  -22,512
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
  9,687
  10,263
  10,840
  11,410
  11,970
  12,517
  13,051
  13,572
  14,082
  14,584
  13,366
  14,434
  15,544
  16,698
  17,896
  19,141
  20,433
  21,776
  23,171
  24,621
  26,128
  27,696
  29,328
  31,028
  32,798
  34,644
  36,568
  38,577
  40,673
  42,863
Discount rate, %
  7.80
  8.19
  8.60
  9.03
  9.48
  9.95
  10.45
  10.98
  11.52
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.11
PV of cash for distribution, $m
  8,986
  8,768
  8,464
  8,075
  7,610
  7,083
  6,507
  5,900
  5,277
  4,654
  3,586
  3,212
  2,828
  2,445
  2,076
  1,729
  1,411
  1,128
  882
  674
  503
  366
  260
  179
  120
  78
  49
  30
  18
  10
Current shareholders' claim on cash, %
  84.3
  72.9
  64.7
  58.6
  54.0
  50.7
  48.2
  46.4
  45.2
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5
  44.5

Telecom Italia S.p.A. (Telecom Italia) operates fixed voice and data infrastructure in Italy, and provides mobile network platforms. The Company focuses on various areas of digital services, including Enriched Communication, Trusted Digital Life, Business Life, Indoor Life, Mobile Open Life and Digital Entertainment. Its segments include Consumer, Business, National Wholesale and Other. It is engaged in developing various projects in areas, including Smart Green, Social Reading, Solutions for good schooling, Digital tourism 2.0, Smart Home, FriendTV and Big Data. Smart Green is the assessment of projects connected with the environment and potential partnerships with the local government offices for the monitoring of air in public offices and urban areas, using networks of sensors connected to the Company's Cloud. The Company is involved, either alone or in partnership with external partners, in devising and developing healthcare services at national, regional and local level.

FINANCIAL RATIOS  of  Telecom Italia ADR (TI)

Valuation Ratios
P/E Ratio 56.6
Price to Sales 5.4
Price to Book 4.8
Price to Tangible Book
Price to Cash Flow 18.1
Price to Free Cash Flow 185.1
Growth Rates
Sales Growth Rate -3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -24%
Cap. Spend. - 3 Yr. Gr. Rate 3%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 134.8%
Total Debt to Equity 153.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 3.9%
Return On Total Capital 3.4%
Ret/ On T. Cap. - 3 Yr. Avg. 2%
Return On Equity 9.3%
Return On Equity - 3 Yr. Avg. 5.5%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 85.9%
Gross Margin - 3 Yr. Avg. 83%
EBITDA Margin 49.4%
EBITDA Margin - 3 Yr. Avg. 50.9%
Operating Margin 19.6%
Oper. Margin - 3 Yr. Avg. 18.5%
Pre-Tax Margin 14.7%
Pre-Tax Margin - 3 Yr. Avg. 9.3%
Net Profit Margin 9.5%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 53.5%
Payout Ratio 12.6%

TI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TI stock intrinsic value calculation we used $24430.972389 million for the last fiscal year's total revenue generated by Telecom Italia ADR. The default revenue input number comes from 0001 income statement of Telecom Italia 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 TI stock valuation model: a) initial revenue growth rate of 20% 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 7.8%, whose default value for TI is calculated based on our internal credit rating of Telecom Italia 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 Telecom Italia 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 TI stock the variable cost ratio is equal to 80.7%.

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 TI 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 10.5% for Telecom Italia ADR.

Corporate tax rate of 27% is the nominal tax rate for Telecom Italia 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 TI 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 TI are equal to 149.4%.

Life of production assets of 10.6 years is the average useful life of capital assets used in Telecom Italia 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 TI is equal to -11.3%. 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 - $25878.7515006 million for Telecom Italia 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 20.512 million for Telecom Italia 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 Telecom Italia ADR at the current share price and the inputted number of shares is $0.1 billion.

RELATED COMPANIES Price Int.Val. Rating
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COMPANY NEWS

▶ [$$] Telecom Italia CEO is Ousted   [05:34AM  The Wall Street Journal]
▶ [$$] Telecom Italia/Elliott: ill humoured   [Nov-12-18 11:57PM  Financial Times]
▶ [$$] Elliott, Vivendi Need to End Their Italian Feud   [Nov-09-18 12:19PM  The Wall Street Journal]
▶ [$$] Telecom Italia Warns on Outlook After 3Q Loss   [01:53AM  The Wall Street Journal]
▶ Why NII Holdings Stock Just Popped 19%   [Nov-02-18 04:41PM  Motley Fool]
▶ New Strong Sell Stocks for October 25th   [Oct-25-18 07:56AM  Zacks]
▶ New Strong Sell Stocks for October 8th   [Oct-08-18 08:16AM  Zacks]
▶ Why NII Holdings Stock Soared Today   [Sep-20-18 12:54PM  Motley Fool]
▶ Telecom Italia Considers Bidding for Nextel in Brazil   [Sep-19-18 09:03PM  Bloomberg]
▶ Vivendi weighing options over Telecom Italia   [Jul-25-18 12:08PM  Reuters]
▶ Telecom Italia Weighs Asset Sales, Including Sparkle   [Jul-24-18 03:57PM  Bloomberg]
▶ Telecom Italia SpA (BIT:TIT) Is Trading At A 32.52% Discount   [Jun-22-18 06:50AM  Simply Wall St.]
▶ Telecom Italia CEO Under Fire After Bashing Directors   [Jun-21-18 09:14AM  Bloomberg]
▶ [$$] Telecom Italia Tug-of-War Explained   [Jun-08-18 11:31AM  The Wall Street Journal]
▶ [$$] Elliott Management's Activism in Europe Explained   [May-24-18 12:56PM  The Wall Street Journal]

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