How to Calculate the Intrinsic Value of a Stock in 2023 (Full Example)
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- เผยแพร่เมื่อ 2 มิ.ย. 2024
- Today we do a full tutorial on how investors like Warren Buffett, Benjamin Graham, Charlie Munger, Seth Klarman, Peter Lynch and Mohnish Pabrai calculate the intrinsic value of a stock. Specifically, we look at the Discounted Cash Flow Analysis to see what we should be paying for the businesses we invest in.
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★ ★ CONTENTS ★ ★
0:00 Calculating the Intrinsic Value of a Stock
0:42 Businesses are Money Printing Machines
1:49 The Discounted Cash Flow Analysis
2:48 How Much Cash Does the Business Generate?
4:20 Calculating Growth in Cash Flow
6:20 Selling the Business in 10 Years
7:10 Discounting the Future Cash Flows
8:24 Calculating Intrinsic Value
9:02 Adding the Cash
10:00 Margin of Safety
DISCLAIMER:
Neither New Money or Brandon van der Kolk are financial advisers. The information provided in this video is for general information only and should not be taken as professional advice. There are risks involved with stock market investing and consumers should not act upon the content or information found here without first seeking advice from an accountant, financial planner, lawyer or other professional. Consumers should always research companies individually and define a strategy before making decisions. Brandon van der Kolk and New Money are not liable for any loss incurred, arising from the use of, or reliance on, the information provided by this video.
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Also one thing I should note is that I tend to look at companies with very low/no debt. The third pillar of the Warren Buffett approach is management (responsible for debt management), which comes before you do your valuation. I just checked out a video from Tom that uses enterprise value instead, so if you want to value businesses with high levels of debt and you need to account for it in your valuation check out the end of his video: th-cam.com/video/cI8ZSf0nkFs/w-d-xo.html
Our method is otherwise the same.
Honestly, Thank you so much. This video will be on reply for many days to come when investing.
Heii Brandon, It seems to me that your method isn't exactly the same. Because Tom discounts also the FCF from the first Year. If I do the exact same example as you did in your Video with Apple I receive an Intrinsic Value of 690B with the Method of Tom, insead of the 759B you received. I would highly appreciate if you could check that again. Is it necessary to discount the FCF of the first year? Kind regards!
Hi great video, but i think there is a mistake in intrinsic value , you should also count with the first year respectively a ,,,year zero'' discounted cash flow to determine intrinsic value( so in your case you should add 53,09B to whole number or am I wrong?)
Hi, I have got a question about the 10 year time span. Why do we always you 10 Years to calculate Intrinsic value? if you hold the company for lets say 15 years, it's intrinsic value will go up. I've spent quite some thinking on this subject and don't really get where the magic number 10 is coming from.
Is there anything like proof recession stock? I am 58 years and would like help in managing my retirement portfolio which is currently $1.25M...down from a high of $1.67M….
@@Stanleytucci819 Please can you leave the info of your investment advisor here? I’m in dire need for one.
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Think of it like this: when you look at a business, consider whether or not their product is essential spending or discretionary spending for their customers. When a recession comes, people pause their discretionary purchases but continue to make their essential purchases. For example, people still buy food, so grocery chains can be good defensive stocks. Even better, discount stores see an increase in revenue in hard times.
@@davidreichert9392 It's a scam, don't answer on these threads.
Excellent video . Can you make 2-3 more videos like this one? To explain with practical examples concepts such as free cash flow, roi, and other concepts so one can evaluate a company.
Watched a couple of different videos on finding intrinsic value and yours is the first that actually explained it in detail.
Hands down the best video that breaks down the investment intrinsic value estimation process that I came across. Well done!
A lot of folks have been going on about a February rally too and said stocks that would be experiencing significant growth these new year season, any idea which stocks this may be? I just sold my home in the Boca Grande area and I’m looking to remunerate a lump sum into the stock market before stocks rebound
yes, transportation, e-commerce among other sectors are expected to experience growth, but who knows, the market has been a basket of surprises.
@Zac Taylor True, we’re only just an information away from amassing wealth, I know alot of folks that made fortunes from the Dotcom crash as well as the 08’ crash and I’ve been looking into similar opportunities in this present market, could this coach that guides you help?
Don’t listen to rally rumours. If anyone could predict that stuff with any amount of consistency they’d be the richest person on the planet ten times over.
Of all the DCF videos I've watched on TH-cam, this one is the clearest and best explained video I've seen yet. I feel like you have filled in a lot of the holes i was missing. Well done! Thank you.
no mine is better
This was very helpful. I never heard anyone explain it so well before. This has definitely helped me out when it comes to stock valuation. Thanks!
Sven Carlin, J Money... Nowadays there are many that do it and provide Excels for free. Brandon is kinda late.
Very well put together mate!
So so grateful to you💯🙏🏻
The best video I watched on DCF analysis. Clear, crisp, short and complete... nothing more to say. Its ULTIMATE! From here I took 22001 million as the shares outstanding as of 2016 and calculated the share price and got the range as 37.54 - 51.27$ (with hidden treassures included). By considering 30% margin of safety got this price range as 26.26 - 35.91 $. Thank you!
Thanks Brandon. This is seriously your most informative video yet!
One word: WOW. The best video I have ever watched about value investing.
Best video I've found so far on the topic. Thank you
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The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional traders.
I trade as a side hustle while keeping my job . I'm tired of trading in losses myself . I've blown my account twice and it's frustrating . I see people making a living out of trading and I want to do same . Please I need help can someone teach me how to trade ?
yeah she does , and in my opinion , it's a huge one and chance for you to change your life with trading .. I just bought my dream Mercedes from last week's profit.A thanks to her expertise.
+14 08
665
Great video Brandon, i missed this type of content like back in the day!
Thank you for the excellent video. This helped me to understand the intrinsic value better compared to other 10+ videos which I have watched. 👍
The fact is that BTC symbolises the future of cryptocurrency, and traders are wondering if now is the best moment to trade, I feel you should examine the situation more closely before jumping to any conclusion. BTC's price has been fluctuating over the previous days, signaling that the market has become unstable and that is it impossible to anticipate whether it will go bearish or bullish. Others are patient, while others continue to trade with no risk. It all depends on the pattern you're trading and the source of your signal;
A lot of investors has restrained from the market because of the volatile and sudden crashed in the market.but I've learnt to understand that trading is quite different from just holding. There are short sell for bearish and long sell for bullish.
Well done!!! Thank you so much!!!!!!!
Dude you're a smart and simple guy. You're my new role model now. Thx.
I started investing in mid 2021 and since then have watched several DCF videos to get a grasp on that process. At this point I understand it reasonably well, and I had the tab for this video open for over a week thinking "it'd be nice to get a little refresher on that" and now that I finally watched it I can easily say this was the most eloquently and understandably explained version of the DCF process I've seen so far. Thank you
Even though I had a good knowledge of the discounted cash flow model, I still found the video very very helpful. Thank you!
Thank you so much. Well explained.. Much needed content!!!
Your finance flow is epic. 💈
Great visuals and example!!
So, this is basically the most important video I’ve ever seen in my life…great video, thanks!!
Great video, Brandon. I also derive much help in my analyses from the Everest Formula analyzer, which provides dashboards with the most important metrics specific to value investors.
I use it too. Very good tool, and the related value investing strategy had massive return over the last years
Thanks for this bro. I know you were down about how this one was received as far as the views go but this is high quality content and appreciated very much
Very good video and explanation of calculating IV using DCF analysis! Bravo!!
Bruh I feel like this was a direct response to a previous request comment I left. Appreciate you and this video!
Great video…quick question. How did you look up Price to Free Cashflow of 10 in your Apple example? Thanks
Great video! It’s really easy to understand everything, you make it easy. Have some questions, why don’t use WACC, difference between Leveraged and Unleveraged valuation and why don’t discount debt at the end?
Greetings from Mexico 🇲🇽
great video, this is so helpful and easy to understand. do you know any tool or service where the current intrinsic values of companies are calculated?
Amazing tutorial ...free piece of gold from Brandon.
Amazing video. Thank you brother❤
Thanks for the video. I always wondered how you could somewhat accurately value growth stocks of various sectors/industries.
Best video yet. Been waiting for this one, great job!
Great video, thx! one quick question, for your example of Apple, do we also need to minus all the debt it had in 2016 after adding all the cash equivalents in the final step to calculate the intrinsic value ? thx!
You have clearly explained the intrinsic value of stock for a beginner in stock markets. Thank you.
Great video, very clear and helpful, TY!
I just can't figure out how the get from the intrinsic value to the price of 1 share? Divide the intrinsic value by shares outstanding in the starting year? Could it be this simple? Thank you.
Great video, thank you so much
Great video mate. Thanks
Thanks Brandon for this great lesson teaching. Quick question, are your courses are just in-depth in value investing? I was thinking of purchasing it last year but held off on it.
Great video!
a really superb informative video
Very nice video mate
Super explanation 👌
Awesome video! Love your channel! I have one question. Why don’t you discount the WACC (Weighted Average Cost of Capital)? Thank you in advance for your response.
Thank you, great lesson.
Great video, at the end to know the Stock Price, I think we have to Divided the market Cap Forecast / Shares outstanding
Thanks for a clear explanation & demo! It's rare to find videos or guides which put this together in a simple manner.
@New Money, a question: How would you estimate the value of an ETF? Would you need to check e.g. the top-10 or top-50% of holdings of a fund to understand if the fund is over or undervalued currently, or is there a more straightforward way?
Great video
I like it bro .need to learn more about how to do my own analysis
Excellent Financial Education! Thank you!! My favorite TH-cam Finance/Stock Market Channel!
Thank you so much ur incredibly smart and helpful
Thank you very much. I will need to rewatch it. Is it possible to make another video like this? Thank you
Exceptionally good. You have a talent for teaching.
Just Wondering if it's ideal to do this method on a quarterly report to calculate intrinsic value? or stick with Annual reports?
how do you go about valuing companies that have negative cash flow during the past couple of years, but have cash on hand for more than a year? is there another evaluation you can do to find a good share price/market cap?
It's a Masterpiece clip for beginners! Well done! It could help a lot of people! 👍🏻
Wicked explanation
In a few words, Apple is overvalued at the moment.
Ty so much
Really great content. Thank you!
Thanks for the great video
Different platform now provide this as part of their data, which one do you think it’s the most reliable?
Hey, just wondering if there's any ASX screener out there which is good
Thanks mate
Great video. Love the Warren and Charlie vibe I'm getting
Thank you for the explanation. Learned a lot and subscribed. I did the calculation of Price / FCF from 2022 to 2018 and noted and average of 34.8%. Is this right? I noticed that you used 10%.
Essentially, I calculated FCF from the Oct 28, 2022 - Oct 28, 2018 10-K reports. Then calculated Share Price / FCF for Dec 31, 2022 - Dec 31, 2018) to get an average of 34.8%. Greatly appreciate your input on this. Thanks!
Definitely do your own due diligence. I use Warren and Charlie's methods too. Thanks for sharing!
Best way to invest.
Dont need the money now 😅, I can wait .
Thanks for the content always well received.
Finally you made one valuation. Congratulation!
BTW: if you apply PE on terminal valuation, it is not intrinsic valuation, but relative.
Cheers!
Nice video. Thank you
Thanks~~>for watching and commenting,
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Is there an excel download available to help with these calculations?
hi, great video, thank you for sharing your knowledge with us. I have only one question, which might sound silly but I don`t get it. To calculate a 15% discount you divide the amount by 1.15 and I am used to calculating it by multiplying the amount by the percentage and them subtract that from the original amount, fer example: 15% of 50,000 is 7,500; 50,000-7,500=42,500. while you did 50,000/1.15=43,478 and we get different answers.
So instead of looking at the individual stock price, you look at the marked cap the business has, when you determan if you want to buy or not ? Because 1 thing is to value the whole business and an other is to value the share ( I assume). Therefore I´m really curious how to do that.
Thanks a lot for the video but there a thing that it's not clear to me. In case a company gives a dividend do you have to include it into the formula? if yes how?
where can i find the paper that explain the cash flow and payments?
So from there do you divide it by the number of shares outstanding to get the individual share price? So based on this example, the intrinsic share price is about $38 per share before MOS?
Can anyone explain the Terminal Value a little more? He mentioned it was 10x, but where is that value coming from and does it change depending on the company? Thanks
Should the liquid assets be multiplied by the growth formula?
Great Video(s) !!! Where do I get historical data 10 years back, regarding the free cashflow, cashfllow-Price Ratio,...?
Thanks man, I always wanted to know how to do that. There are a couple of companies I would like to do this on. Thanks
Cheers mate! That was very hekpful indeed. The only think i missed was the share price, but i guess is just MOS/Outstanding Shares. I got in a 5y FCF of 15% MOS a price of $59, that's incredible low, using the same premises.The world have to blow up to AAPL get at this level. Hopefully i didnt do anything very wrong.
Crazy I just watched your video yesterday on how to value a stock from a year or 2 ago.
Time for an update!
The Apple to free cash flow= Share price as a % cash flow in that year? Great video.
great video, but traveling backwards on the monopoly board is just fking with my mind haha.
Your discount should be relative to the “risk free rate” not a random return you want to achieve.
I made a Google spreadsheet of the calculations of your video. Great video, thank you. "Let's go Brandon"😉
I'd just add that subtracting stock-based compensation from operating cash flow makes a lot of sense too.
The stock market rally started Thursday strong but reversed solidly lower, undercutting the lows of the prior few days. It's a reason to be cautious in the very short term. But the pullback could be setting the stage for another solid advance. Tesla (TSLA) continued to climb Thursday, even though the EV giant pared intraday gains. TSLA stock has now more than doubled from its Jan. 6 bear-market low,I'm still at a crossroads deciding if to liquidate my $238k stock portfolio, what’s the best way to take advantage of this bear market?
Since the crash, I've been in the red. I’m playing the long term game, so I'm not too worried but Jim Cramer mentioned there are still a lot of great opportunities, though stocks has been down a lot. I also heard news of a guy that made $250k from about $110k since the crash and I would really look to know how to go about this.
There are actually a lot of ways to make high yields in a crisis, but such trades are best done under the supervision of Financial advisor.
Thats true, I've been getting assisted by a FA for almost a year now, I started out with less than $200K and I'm just $19,000 short of half a million in profit.
@@AlexanderTurke Impressive can you share more info?
@@AngelsEyes-ny1pc HEATHER ANN CHRISTENSEN is my adviser and she is highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
@5:10 your chart shows EPS(diluted) as Billions, it's actually Millions unless you did some math you didn't tell us about. "Revenue" took some time to find, it's actually "Net Sales" on the Statement Of Operations. It would be helpful to explain where you got the numbers and how actually you calculated the annual growth rate. Still, great video. It's getting me a step closer to actually figuring out how to value a business.
is there websites that has this calculators built-in into them and can help compare multiple stocks ?
How did you calculate annual growth rate for revenue, eps, equity, and free cash flow?
How do you calculate for a company having a bad year or two? Do you use their free cash flow from previous years? For instance, Amazon, 2021 and 2022 had negative free cash flow, just wondering how to do the analysis on that. Thanks ☺️ Great content btw!
Also, something like berkshire hathaway where they have a year with negative net income this year
If they gain cash flow it's delayed 1/2 a year for every bad year. Every bad year is a debt.
Viewer: how many dcf videos can u make?
New Money: Yes!
This is like the 4th video on the same topic.... how many more are there going to be?
How do you get the price to FCF? Do you just use the average of the last 10 years?
my question is, how do i assume the per-share's market value in 10 years?
loved the video, was very clear.
but i just need a lil more help ;)
Awesome video. But there is an error. You use "." as decimal separator. When you calculate terminal value you should put 1.38T or 1,377.02 B
Hi could you please explain how you got the 15% return at 11:13 minutes into the video?
Instead of using free cash flow, would this method also working using the current EPS (earnings per share)?
Also how does this compare to the Ben Graham formula?