Intrinsic value of Vodafone Group ADR - VOD

Previous Close

$28.98

  Intrinsic Value

$17.23

stock screener

  Rating & Target

sell

-41%

  Value-price divergence*

+115%

Previous close

$28.98

 
Intrinsic value

$17.23

 
Up/down potential

-41%

 
Rating

sell

 
Value-price divergence*

+115%

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

We calculate the intrinsic value of VOD 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 76.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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, %
  -4.38
  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
  50,271
  51,276
  52,456
  53,804
  55,317
  56,994
  58,835
  60,838
  63,007
  65,344
  67,852
  70,534
  73,397
  76,445
  79,684
  83,122
  86,764
  90,620
  94,698
  99,006
  103,556
  108,356
  113,418
  118,754
  124,375
  130,297
  136,531
  143,093
  149,998
  157,262
  164,903
Variable operating expenses, $m
 
  49,835
  50,917
  52,152
  53,540
  55,077
  56,764
  58,601
  60,589
  62,731
  65,030
  64,660
  67,284
  70,079
  73,048
  76,199
  79,538
  83,073
  86,811
  90,761
  94,931
  99,331
  103,972
  108,863
  114,017
  119,445
  125,160
  131,176
  137,505
  144,165
  151,169
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
  46,339
  49,835
  50,917
  52,152
  53,540
  55,077
  56,764
  58,601
  60,589
  62,731
  65,030
  64,660
  67,284
  70,079
  73,048
  76,199
  79,538
  83,073
  86,811
  90,761
  94,931
  99,331
  103,972
  108,863
  114,017
  119,445
  125,160
  131,176
  137,505
  144,165
  151,169
Operating income, $m
  3,931
  1,441
  1,539
  1,652
  1,778
  1,917
  2,071
  2,237
  2,418
  2,613
  2,821
  5,874
  6,113
  6,367
  6,636
  6,923
  7,226
  7,547
  7,887
  8,246
  8,624
  9,024
  9,446
  9,890
  10,358
  10,851
  11,371
  11,917
  12,492
  13,097
  13,734
EBITDA, $m
  15,631
  12,341
  12,625
  12,950
  13,314
  13,718
  14,161
  14,643
  15,165
  15,727
  16,331
  16,977
  17,666
  18,399
  19,179
  20,006
  20,883
  21,811
  22,792
  23,829
  24,924
  26,080
  27,298
  28,582
  29,935
  31,361
  32,861
  34,440
  36,102
  37,851
  39,690
Interest expense (income), $m
  1,334
  1,264
  1,317
  1,382
  1,457
  1,540
  1,632
  1,734
  1,844
  1,964
  2,093
  2,231
  2,379
  2,537
  2,705
  2,883
  3,073
  3,273
  3,486
  3,711
  3,948
  4,199
  4,463
  4,742
  5,036
  5,346
  5,673
  6,016
  6,378
  6,759
  7,159
Earnings before tax, $m
  2,947
  177
  222
  269
  321
  377
  438
  503
  574
  649
  729
  3,643
  3,734
  3,830
  3,932
  4,040
  4,153
  4,274
  4,401
  4,535
  4,676
  4,825
  4,982
  5,148
  5,322
  5,505
  5,698
  5,901
  6,114
  6,339
  6,575
Tax expense, $m
  5,028
  48
  60
  73
  87
  102
  118
  136
  155
  175
  197
  984
  1,008
  1,034
  1,062
  1,091
  1,121
  1,154
  1,188
  1,224
  1,263
  1,303
  1,345
  1,390
  1,437
  1,486
  1,538
  1,593
  1,651
  1,711
  1,775
Net income, $m
  -6,646
  129
  162
  197
  234
  275
  320
  368
  419
  474
  532
  2,660
  2,726
  2,796
  2,870
  2,949
  3,032
  3,120
  3,213
  3,311
  3,414
  3,523
  3,637
  3,758
  3,885
  4,019
  4,160
  4,308
  4,463
  4,627
  4,799

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  15,784
  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
  163,257
  150,371
  153,829
  157,783
  162,221
  167,139
  172,535
  178,411
  184,772
  191,624
  198,978
  206,846
  215,241
  224,179
  233,679
  243,759
  254,441
  265,749
  277,707
  290,341
  303,682
  317,758
  332,603
  348,251
  364,737
  382,101
  400,384
  419,627
  439,876
  461,179
  483,586
Adjusted assets (=assets-cash), $m
  147,473
  150,371
  153,829
  157,783
  162,221
  167,139
  172,535
  178,411
  184,772
  191,624
  198,978
  206,846
  215,241
  224,179
  233,679
  243,759
  254,441
  265,749
  277,707
  290,341
  303,682
  317,758
  332,603
  348,251
  364,737
  382,101
  400,384
  419,627
  439,876
  461,179
  483,586
Revenue / Adjusted assets
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
  0.341
Average production assets, $m
  60,929
  62,147
  63,576
  65,210
  67,045
  69,077
  71,307
  73,736
  76,365
  79,197
  82,236
  85,488
  88,957
  92,651
  96,578
  100,744
  105,158
  109,832
  114,774
  119,996
  125,509
  131,327
  137,462
  143,929
  150,743
  157,919
  165,475
  173,428
  181,797
  190,602
  199,862
Working capital, $m
  -17,780
  -26,254
  -26,857
  -27,548
  -28,323
  -29,181
  -30,123
  -31,149
  -32,260
  -33,456
  -34,740
  -36,114
  -37,579
  -39,140
  -40,798
  -42,558
  -44,423
  -46,398
  -48,485
  -50,691
  -53,020
  -55,478
  -58,070
  -60,802
  -63,680
  -66,712
  -69,904
  -73,263
  -76,799
  -80,518
  -84,430
Total debt, $m
  43,945
  37,638
  39,495
  41,618
  44,002
  46,643
  49,540
  52,696
  56,111
  59,791
  63,740
  67,965
  72,473
  77,273
  82,374
  87,787
  93,524
  99,596
  106,017
  112,802
  119,966
  127,525
  135,497
  143,900
  152,753
  162,077
  171,895
  182,229
  193,102
  204,542
  216,575
Total liabilities, $m
  87,055
  80,749
  82,606
  84,729
  87,113
  89,754
  92,651
  95,807
  99,222
  102,902
  106,851
  111,076
  115,584
  120,384
  125,485
  130,898
  136,635
  142,707
  149,128
  155,913
  163,077
  170,636
  178,608
  187,011
  195,864
  205,188
  215,006
  225,340
  236,213
  247,653
  259,686
Total equity, $m
  76,201
  69,622
  71,223
  73,053
  75,108
  77,385
  79,884
  82,604
  85,549
  88,722
  92,127
  95,770
  99,657
  103,795
  108,193
  112,860
  117,806
  123,042
  128,578
  134,428
  140,605
  147,122
  153,995
  161,240
  168,873
  176,913
  185,378
  194,287
  203,663
  213,526
  223,901
Total liabilities and equity, $m
  163,256
  150,371
  153,829
  157,782
  162,221
  167,139
  172,535
  178,411
  184,771
  191,624
  198,978
  206,846
  215,241
  224,179
  233,678
  243,758
  254,441
  265,749
  277,706
  290,341
  303,682
  317,758
  332,603
  348,251
  364,737
  382,101
  400,384
  419,627
  439,876
  461,179
  483,587
Debt-to-equity ratio
  0.577
  0.540
  0.550
  0.570
  0.590
  0.600
  0.620
  0.640
  0.660
  0.670
  0.690
  0.710
  0.730
  0.740
  0.760
  0.780
  0.790
  0.810
  0.820
  0.840
  0.850
  0.870
  0.880
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
Adjusted equity ratio
  0.436
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -6,646
  129
  162
  197
  234
  275
  320
  368
  419
  474
  532
  2,660
  2,726
  2,796
  2,870
  2,949
  3,032
  3,120
  3,213
  3,311
  3,414
  3,523
  3,637
  3,758
  3,885
  4,019
  4,160
  4,308
  4,463
  4,627
  4,799
Depreciation, amort., depletion, $m
  11,700
  10,900
  11,086
  11,298
  11,537
  11,800
  12,090
  12,405
  12,747
  13,115
  13,509
  11,102
  11,553
  12,033
  12,543
  13,084
  13,657
  14,264
  14,906
  15,584
  16,300
  17,055
  17,852
  18,692
  19,577
  20,509
  21,490
  22,523
  23,610
  24,753
  25,956
Funds from operations, $m
  14,157
  11,030
  11,248
  11,495
  11,771
  12,076
  12,410
  12,773
  13,166
  13,588
  14,041
  13,762
  14,279
  14,829
  15,413
  16,032
  16,689
  17,384
  18,118
  18,894
  19,714
  20,578
  21,489
  22,450
  23,462
  24,528
  25,650
  26,831
  28,073
  29,381
  30,756
Change in working capital, $m
  -854
  -515
  -604
  -690
  -775
  -859
  -942
  -1,026
  -1,111
  -1,196
  -1,284
  -1,374
  -1,466
  -1,561
  -1,659
  -1,760
  -1,865
  -1,974
  -2,088
  -2,206
  -2,329
  -2,458
  -2,592
  -2,732
  -2,878
  -3,032
  -3,192
  -3,360
  -3,535
  -3,719
  -3,912
Cash from operations, $m
  15,011
  11,544
  11,852
  12,185
  12,546
  12,934
  13,352
  13,799
  14,276
  14,785
  15,325
  15,136
  15,744
  16,389
  17,071
  17,792
  18,554
  19,358
  20,206
  21,100
  22,043
  23,036
  24,081
  25,182
  26,340
  27,559
  28,842
  30,190
  31,609
  33,100
  34,668
Maintenance CAPEX, $m
  0
  -7,913
  -8,071
  -8,257
  -8,469
  -8,707
  -8,971
  -9,261
  -9,576
  -9,917
  -10,285
  -10,680
  -11,102
  -11,553
  -12,033
  -12,543
  -13,084
  -13,657
  -14,264
  -14,906
  -15,584
  -16,300
  -17,055
  -17,852
  -18,692
  -19,577
  -20,509
  -21,490
  -22,523
  -23,610
  -24,753
New CAPEX, $m
  -9,352
  -1,219
  -1,429
  -1,634
  -1,834
  -2,033
  -2,230
  -2,429
  -2,629
  -2,832
  -3,039
  -3,252
  -3,470
  -3,694
  -3,926
  -4,166
  -4,415
  -4,673
  -4,942
  -5,222
  -5,514
  -5,818
  -6,135
  -6,467
  -6,814
  -7,176
  -7,556
  -7,953
  -8,369
  -8,804
  -9,261
Cash from investing activities, $m
  -8,890
  -9,132
  -9,500
  -9,891
  -10,303
  -10,740
  -11,201
  -11,690
  -12,205
  -12,749
  -13,324
  -13,932
  -14,572
  -15,247
  -15,959
  -16,709
  -17,499
  -18,330
  -19,206
  -20,128
  -21,098
  -22,118
  -23,190
  -24,319
  -25,506
  -26,753
  -28,065
  -29,443
  -30,892
  -32,414
  -34,014
Free cash flow, $m
  6,121
  2,413
  2,351
  2,294
  2,242
  2,195
  2,151
  2,110
  2,071
  2,035
  2,001
  1,204
  1,172
  1,142
  1,113
  1,084
  1,056
  1,028
  1,000
  973
  945
  918
  890
  863
  835
  806
  777
  747
  717
  686
  654
Issuance/(repayment) of debt, $m
  -684
  1,523
  1,857
  2,123
  2,383
  2,641
  2,898
  3,155
  3,416
  3,680
  3,949
  4,225
  4,508
  4,800
  5,101
  5,413
  5,736
  6,072
  6,421
  6,785
  7,164
  7,559
  7,972
  8,403
  8,853
  9,324
  9,818
  10,334
  10,874
  11,440
  12,033
Issuance/(repurchase) of shares, $m
  26
  1,245
  1,439
  1,634
  1,821
  2,002
  2,179
  2,353
  2,526
  2,699
  2,873
  983
  1,161
  1,343
  1,528
  1,718
  1,914
  2,116
  2,324
  2,539
  2,763
  2,995
  3,236
  3,487
  3,748
  4,021
  4,305
  4,602
  4,912
  5,236
  5,575
Cash from financing (excl. dividends), $m  
  -5,680
  2,768
  3,296
  3,757
  4,204
  4,643
  5,077
  5,508
  5,942
  6,379
  6,822
  5,208
  5,669
  6,143
  6,629
  7,131
  7,650
  8,188
  8,745
  9,324
  9,927
  10,554
  11,208
  11,890
  12,601
  13,345
  14,123
  14,936
  15,786
  16,676
  17,608
Total cash flow (excl. dividends), $m
  111
  5,182
  5,648
  6,051
  6,447
  6,837
  7,227
  7,618
  8,013
  8,414
  8,823
  6,412
  6,842
  7,285
  7,742
  8,215
  8,706
  9,215
  9,745
  10,297
  10,872
  11,472
  12,098
  12,752
  13,436
  14,151
  14,899
  15,683
  16,503
  17,362
  18,261
Retained Cash Flow (-), $m
  11,742
  -1,375
  -1,601
  -1,830
  -2,055
  -2,277
  -2,498
  -2,721
  -2,945
  -3,173
  -3,405
  -3,643
  -3,887
  -4,138
  -4,398
  -4,667
  -4,946
  -5,235
  -5,536
  -5,850
  -6,177
  -6,517
  -6,873
  -7,245
  -7,633
  -8,040
  -8,465
  -8,910
  -9,375
  -9,863
  -10,375
Prev. year cash balance distribution, $m
 
  7,954
  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
 
  11,761
  4,047
  4,221
  4,392
  4,560
  4,729
  4,898
  5,068
  5,241
  5,418
  2,769
  2,955
  3,146
  3,344
  3,548
  3,760
  3,980
  4,209
  4,447
  4,695
  4,955
  5,225
  5,508
  5,803
  6,112
  6,435
  6,773
  7,127
  7,498
  7,887
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  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
PV of cash for distribution, $m
 
  11,265
  3,697
  3,662
  3,600
  3,515
  3,407
  3,280
  3,134
  2,973
  2,799
  1,293
  1,237
  1,171
  1,095
  1,014
  927
  837
  747
  657
  570
  487
  410
  340
  277
  222
  174
  134
  101
  74
  53
Current shareholders' claim on cash, %
  100
  98.2
  96.2
  94.1
  91.8
  89.5
  87.0
  84.6
  82.1
  79.6
  77.1
  76.3
  75.4
  74.4
  73.3
  72.2
  71.0
  69.8
  68.5
  67.2
  65.8
  64.5
  63.1
  61.7
  60.3
  58.9
  57.5
  56.2
  54.8
  53.4
  52.1

Vodafone Group Plc (Vodafone) is a telecommunications company. The Company's business is organized into two geographic regions: Europe, and Africa, Middle East and Asia Pacific (AMAP). Its segments include Europe and AMAP. Its Europe segment includes geographic regions, such as Germany, Italy, the United Kingdom, Spain and Other Europe. The Other Europe includes the Netherlands, Portugal, Greece, Hungary and Romania, among others. Its AMAP segment includes India, South Africa, Tanzania, Mozambique, Lesotho, Africa, Turkey, Australia, Egypt, Ghana, Kenya, New Zealand and Qatar, among others. The Company provides a range of services, including voice, messaging and data across mobile and fixed networks. The Company acquires spectrum and licenses to use radio frequencies that deliver mobile services. Its fixed capabilities include cable, fiber and copper networks to enable television, broadband and voice services.

FINANCIAL RATIOS  of  Vodafone Group ADR (VOD)

Valuation Ratios
P/E Ratio -116.1
Price to Sales 15.3
Price to Book 10.1
Price to Tangible Book
Price to Cash Flow 51.4
Price to Free Cash Flow 136.3
Growth Rates
Sales Growth Rate -4.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.2%
Cap. Spend. - 3 Yr. Gr. Rate 3.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 47.4%
Total Debt to Equity 57.7%
Interest Coverage 3
Management Effectiveness
Return On Assets -4.4%
Ret/ On Assets - 3 Yr. Avg. 7.6%
Return On Total Capital -5.1%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity -8.1%
Return On Equity - 3 Yr. Avg. -1.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 27.4%
Gross Margin - 3 Yr. Avg. 27.1%
EBITDA Margin 31.8%
EBITDA Margin - 3 Yr. Avg. 29.1%
Operating Margin 7.8%
Oper. Margin - 3 Yr. Avg. 4.9%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 3%
Net Profit Margin -13.2%
Net Profit Margin - 3 Yr. Avg. -3%
Effective Tax Rate 170.6%
Eff/ Tax Rate - 3 Yr. Avg. -923.9%
Payout Ratio -59%

VOD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VOD stock intrinsic value calculation we used $50271 million for the last fiscal year's total revenue generated by Vodafone Group ADR. The default revenue input number comes from 2017 income statement of Vodafone Group 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 VOD 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 4.4%, whose default value for VOD is calculated based on our internal credit rating of Vodafone Group 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 Vodafone Group 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 VOD stock the variable cost ratio is equal to 97.3%.

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 VOD 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 3.5% for Vodafone Group ADR.

Corporate tax rate of 27% is the nominal tax rate for Vodafone Group 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 VOD 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 VOD are equal to 121.2%.

Life of production assets of 7.7 years is the average useful life of capital assets used in Vodafone Group 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 VOD is equal to -51.2%. 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 - $76201 million for Vodafone Group 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 2651.69 million for Vodafone Group 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 Vodafone Group ADR at the current share price and the inputted number of shares is $76.8 billion.

RELATED COMPANIES Price Int.Val. Rating
ORAN Orange ADR 16.01 21.88  buy
TEF Telefonica ADR 10.38 8.04  sell
BT BT Group ADR 18.12 27.33  buy
TI Telecom Italia 9.12 21.75  str.buy

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Financial statements of VOD
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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