How To Calculate Intrinsic Value (Full Example)
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- เผยแพร่เมื่อ 19 พ.ค. 2024
- ⊳Intrinsic Value Calculation Website: www.buffettinvestors.com/?via...
A step by step guide on calculating the intrinsic value of a stock. I've tried to make this as simple as possible. Hope it helps!
Link To Spreadsheet Calculator (Click File - Download - Excel):
docs.google.com/spreadsheets/...
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Intrinsic value, is arguably the most important thing to know when it comes to investing. Because if you can’t calculate the intrinsic value, then how do you know if you’re getting a good deal for the stock. How can you tell if you’re not overpaying? No intrinsic value = no idea if the stock is worth buying or not. As Warren Buffett says “the critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price”.
So that brings us to the question, well how do we calculate the intrinsic value of a stock? That is what this whole video is going to be dedicated to. A simple step by step guide on calculating the intrinsic value of a stock.
How To Calculate The Intrinsic Value Of A Stock
Ok, Warren Buffett makes the definition of intrinsic value crystal clear. He said “Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life”. So we look at the business. We determine how much cash it will generate over time. And then we discount these cash flows back to the present day.
In order to do this calculation we need 3 ingredients. 1 is the current cashflow. 2 is the cashflow growth rate. And 3 is the discount rate in order to discount the cash flows back to the present day and determine our current intrinsic value…
Step 1: Find The Cashflow Of The Stock
The reason why Buffett specifically said cashflow, instead of earnings is because earnings can easily be manipulated by the management team. But on the other hand, it is extremely hard almost impossible to manipulate the actual physical cash flows that a business generates. Put simply cash flow is more reliable than earnings.
So to find the cashflow it’s pretty easy in the modern day, all thanks to the internet. For this example I’m going to use Apple stock, since that’s quite a well-known talked about stock, even Warren Buffett owns it himself…
So the website that we use to get these metrics is called gurufocus. So let’s type in, Apple stock gurufocus… Than what we want to do is go to the DCF section. Discounted Cash Flow. And if we just zoom in right here, it will tell us what the current cash flow is for Apple stock. Right now, the free cash flow is $5.57. So remember that figure because we’re going to be using it soon. But before we need to determine what the growth rate is going to be for that cash flow…
Step 2: Determine The Cash Flow Growth Rate
Remember that Buffett said to calculate the intrinsic value, you need to discount the future cash flows of the business. In order to know the future cash flows, we need to know how much the current cash flow is going to grow by.
So for Apple the example that we’re using the current cash flow is $5.57. What will the growth rate be for this?
One of the best ways of determining future growth rate is by looking at the growth rate in the past. Then you can extrapolate this into the future. But you want to be conservative, and make it somewhat lower, since businesses grow faster at the beginning and start slow down.
So to find Apple’s past cash flow growth rate, just go to the exact same place that we were at before. Here is where we found the current cash flow. And here is where we see the past cash flow growth rates.
So don’t worry about the 1 year growth rate, it’s better to focus on the longer term ones. So over the past 5 years Apple has had an 8% growth. And the past 10 years it’s had 16.2% average yearly growth. If we look at the growth in earnings per share, it’s around the same numbers..
So in the future we can say that over the next 5 years we might see an 8% growth and the 5 years after that we might see around a 6% growth.
And now we have 2 of the key ingredients that we need to put into our formula for intrinsic value.
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This video is amazing. Thank you for explaining intrinsic value that simple, other people really ain't able to explain what intrinsic value is.
I love this video and really appreciate the explanation. It would be so awesome if you did a livestream and took five companies and repeated the process going through the steps. Maybe even a pay per view event 90 minute session. Anyway the one area that was confusing was the terminal value step. Everything else made sense based on data but was not sure how you come up with best estimate based on type of stock or space or industry the stock represents. How much goodwill or longevity comes into play or other factors. thank you.
That's exactly where I'm going with it and do plan to compare value methods. I also know the business model is extremely important and must be in good shape. There is research to be done and I'm thinking about growth rates.
I really love this video! such a great quality and a wonderful explanation!
Are you wondering where the multiple 26.9 came from? Scrolling through the comments trying to find anyone to explain it. Here is the explanation. The CF multiple in the video is determined by dividing the current stock price, in the case of this video it was $154.30, by the cashflow price, $5.57. So 154.30/5.57. Now if you have pulled out your calculator, and done that equation, you will notice that the variable you get is not 26.9, but rather 27.7. Why does the video say 26.9? We don't know. No one in the comments does and the video is 6 months old, so you will likely not recieve a response to this question. But now you have the answer to how you get the CashFlow multiple, so you can start calculating intrinsic value with that helpful spread sheet.
God bless!
It's probably just a lag in the editing of the video. If you reverse the formula --> 26.9 x $5.57 = stock price = $149.83
So pretty close to the $154.30
Literally what i needed to learn even more! Thank you!
Great video mate. Really well summarised with excellent graphics to assist!
This video was well worth my time! Thank you for sharing
thank you i was trying to find an error in my spreadsheet and thanks your XML i can find it and understand the reason i was wrong, great video
Thanks for this video!! so clear and didactic !! encourages people to know that this is not that complex and that with dedication one can learn to invest conscientiously
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I really appreciate the video. This video is the best video on this subject
That point about why you use cash flow instead of earnings is great. Earnings can be easily manipulated and are an accounting based metric that doesn’t always reflect underlying business reality. Cash flow on the other hand, doesn’t lie
Did I miss this? Where did you get, or how did you calculate the 6-10 year 6% figure. I appreciate your feedback!
Thank you Investor Center. Congrats on the success of the channel!
I was being more conservative, as companies growth tends to decrease as time goes along.
@@thecooperacademy I appreciate that. Still have a long way to go to get to your level!
This website is handy to calculate intrinsic value too: : www.buffettinvestors.com/?via=cooper
(p.s. watch out, there are a lot of bad actors in the comment section below)
One question.... why do you use 11 instead of 10 when calculating the PV of the terminal value? Shouldn't that be based on the end of year 10? Great video and thank you very much for the excel link!
Best explanation I heard for the topic. Great job man ! Thanks heaps
Thank you Abdul. Appreciate it.
Hey Abdul, it seems you understood this video very well. Maybe you can help me with a question:
5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
@@matthewmanucci check this video. The guy presented a very clear and impressive formula
th-cam.com/video/ICiwzpQDGCI/w-d-xo.html
@@matthewmanucci by the way , Phill Town in his book Rule #1 suggests that we double the growth rate to find a future PE. However , If historically the number is lesser, he suggests we should stick to the lesser to be safe.
Regardless, this is pretty much an assumption u need to ballpark. If u think the business should be growing very fast by the time u want to consider the future price, then give it a PE 25-20. If you think it will have a regular average growth , then 15 PE should be safe. And if it is a slow growing one, then stick with 10.
@@aalhaidari Why is the terminal value (M7 on the google sheet) use 11 years instead of 10 to calculate the $76.77?
Thanks alot this helped me out , hope you can upload more videos luke this :)
Fantastic and very clear video on how to determine the intrinsic value of a stock and thank legend for providing the us with spreadsheet, can't thank you enough!! 🙏🙏
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HelloRaMz3, it seems you understood this video very well. Maybe you can help me with a question:
At 5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
If you want to go a bit more in depth with a DCF, the way Buffett actually calculates intrinsic value is actually net income + Depreciation and Amortisation + change in deferred tax- maintenance capital expenditure + change in working capital. That provides a much clearer indication of forecasted cash flows available to an investor
what does that mean if you dont mind me asking
Thank you so much for this video. Very informative 💯💯
Thank you so much for sharing. I learned a lot from this video. Gonna try it out now. : )
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Thanks Cooper. This is really informative video on intrinsic value of a stock. Also, you shared the Excel to calculate intrinsic value easily. Keep doing the great videos like this. Much appreciated!!
Hello Ptadeep Malhotra, it seems you understood this video very well. Maybe you can help me with a question:
At 5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
I downloaded the calculation template. I am going to use it thanks. I have been wrestling with creating my own template with little success. Got it now :) Cheers.
-📩📞I𝟹𝟻𝟸𝟼𝟻𝟾𝟹𝟼𝟺𝟶 ‘,,,,
This video is amazing! God bless you man!
👆📩
This video is exactly why I follow this channel.
Thank you Andrew!
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Thanks a lot, Mr Cooper. it was very useful.
This is great. Exactly what I'm looking for. I will be using this information. Question: It seems like there are scanners or other resources that can identify value stocks, that are on sale?
Excellent video for any and all investors trying how to decipher if a stock is truly worth it! Personally, I also start off by analyzing the stocks industry as well whether it is growing or dying then zoom in further on high quality companies within the industry.. finally I work to determine the intrinsic value, again, great video 👏
Hey Blue Lion Finance, it seems you understood this video very well. Maybe you can help me with a question:
At 5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
This is a really good step by step simple present value calc. Apple’s growth is very low compared to some of it’s peers.
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Great and practical instructions. I have a question though. What if the free cashflow in Column TTM is negative? Many thanks,
Keep them coming 👌🏻 thanks
Super video! Where did found that multiple of 20 used on Terminal Value cell? (Cell M6)
Would you kindly do another one of these very illustrative tutorials but on the business model of XYz stock ?
Glad I subscribed to your channel!
T̬̤̯ h̬̤̯ a̬̤̯ n̬̤̯ k̬̤̯ s̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ w̬̤̯ a̬̤̯ t̬̤̯ c̬̤̯ h̬̤̯ i̬̤̯ n̬̤̯ g̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ m̬̤̯ o̬̤̯ r̬̤̯ e̬̤̯ g̬̤̯ u̬̤̯ i̬̤̯ d̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ e̬̤̯ a̬̤̯ n̬̤̯ d̬̤̯ f̬̤̯ i̬̤̯ n̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ i̬̤̯ a̬̤̯ l̬̤̯ o̬̤̯ p̬̤̯ p̬̤̯ o̬̤̯ r̬̤̯ t̬̤̯ u̬̤̯ n̬̤̯ i̬̤̯ t̬̤̯ i̬̤̯ e̬̤̯ s̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ *̬̤̯ •̬̤̯ w̬̤̯ •̬̤̯ h̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ t̬̤̯ •̬̤̯ s̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ p̬̤̯ •̬̤̯ p̬̤̯ *̬̤̯ o̬̤̯ n̬̤̯
*̬̤̯ {̬̤̯
Glad to have you subscribed!
Hi how do i find the current cash flow multiple? You say apples was 26.9? Thanks in advance!
Greatly appreciated!
First, thank you so much for this video and insights. But how this intrinsic model is different than the DCF?
Hey, where is the spreadsheet you mention? I cannot find it. Not certain how you came up with the figures you came up with on row 7 (B7 through K7)
Thank you very much for this video.
No worried Toni :)
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Wow this is amazing. Thank you so much for explaining intrinsic value calculations in plain English
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Really enjoyed the video! How did you arrive at 8 and 6% for growth rates in the future? Also, where do you get the cashflow multiple?
Hi. Love the Video! Can you please explain how you got the *20 multiplier for the Terminal Value? In the video you said that "apple's current cash flow multiple is 26.9" I am not sure where you found that 26.9% value?
I have the same question!
Don't know if it's sarcasm but if it's real then here's the answer:
FCF = Cash inflows from operations - Investment in fixed assets cash outflow.
Now divide the market capitalization of company with FCF and you get the multiplier.
this is a extraordinary video and it is greatly appreciated! The content, might I add, you provide to the investing community is superb!
I appreciate that Tobio!
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I don’t understand, I’m completely lost at how you came up with 8% for 0-5yrs and 6% 5-10yrs. How do you find these percentages? I was thinking 8.00%+8=16% but wasn’t sure after that I don’t even understand where the 6% came from😭 I’m horrible at math but I’m trying
Did you ever figure this out because I had the same question😀
earlier in the video he said that for the future you need to take 15% if the past was 20% as example so 3/4. the first 5 years = 8 so the 'second' 5 years is 8.2% * 0,75 = 6,15 = 6. i think that is why, im not sure but thats my thought of it
You should consider putting in the price as the present value of the stock, and backing out the implied discount rate (expected return). Use the 5 or 10 year FCF growth as fixed, as you can do that for every stock, so it is consistent. So at any point in time you can generate the returns on offer and pick the stocks with the best return from your buy rated companies list (a list of companies with predictable cashflows and earnings, which have robust balance sheets). The issue with this method though is that FCF can be all over the place at times. Owner earnings are probably a better metric to use instead of FCF. Especislly if you have checked the quality of earnings first.
T̬̤̯ h̬̤̯ a̬̤̯ n̬̤̯ k̬̤̯ s̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ w̬̤̯ a̬̤̯ t̬̤̯ c̬̤̯ h̬̤̯ i̬̤̯ n̬̤̯ g̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ m̬̤̯ o̬̤̯ r̬̤̯ e̬̤̯ g̬̤̯ u̬̤̯ i̬̤̯ d̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ e̬̤̯ a̬̤̯ n̬̤̯ d̬̤̯ f̬̤̯ i̬̤̯ n̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ i̬̤̯ a̬̤̯ l̬̤̯ o̬̤̯ p̬̤̯ p̬̤̯ o̬̤̯ r̬̤̯ t̬̤̯ u̬̤̯ n̬̤̯ i̬̤̯ t̬̤̯ i̬̤̯ e̬̤̯ s̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ *̬̤̯ •̬̤̯ w̬̤̯ •̬̤̯ h̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ t̬̤̯ •̬̤̯ s̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ p̬̤̯ •̬̤̯ p̬̤̯ *̬̤̯ o̬̤̯ n̬̤̯
*̬̤̯ {̬̤̯
Could u make a video on the method you’re talking about? Or what’s your social media, I’d like to dm you for more info on this method
Well done 👏 great vdo
Wow, this is amazing. I have watched many different videos/tutorials before about intrinsic value calculation. This is by far the best explanation and very easy to use. Thank you!!
If I may ask a question, I did this calculation for CVS and the current value of the stock is extremely undervalued. But, based on EPS calculations, it's not. Why is the valuation so different when using FCF vs EPS?
eps can be highly manipulated, like paying a 1 time debt or fine, or acquisitions. FCF will be better
Hey jithu jithu, it seems you understood this video very well. Maybe you can help me with a question:
At 5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
This video is great. Thumps up !
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How did you determine "the Present Value (Stock)"
I have been watching some videos and I was thinking about investing in bitcoin or forex , but still don't know where to start from, any recommendation?
Same here ,It's strange how people talk about all the profits, they've been making through trading of bitcoin, while am here not making any profit at all. Please can Someone put me through on the right path.
Most time having knowledge or insight about a particular activity can as well be a pleasing exercise. I can boldly say that forex and crypto trading is one of the profitable money exchange services that elevates investors and their financial status.
That's true most people today have been having a lot of failures in forex and crypto sector because of poor orientation or bad experts
You don't make money on forex or crypto by holding your coins rather you trade to make gains
I believe your view
Buffet don't just buy stocks like regular Joe like you and me. He buys companies and control the board and management, using other people's money and insurance premiums. That's where the bulk of his wealth comes from.
Cash flow is king 💰
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Best video ever
May you please make a video on how to create this spread sheet.
Mate, at 6:00 you multiplied by 20 as it is lower than the Cash Flow multiple of 26.9. Where did you get that figure of 26.9 from? I didn't see that 26.9 anywhere in the video.
I googled the same question and what I found is that, cash flow multiple is " current price/cash flow". So in this example (by the time I am commenting this), the current price of apple is $146.19 and CF is 5.57. So the multiple he is talking about is, 146.19/5.57= 26.22.
@@NikhilMBagde thank you I had the same question
@@NikhilMBagde The stock price in his video is $154.30 and I can only assume that this is the value he would have used to calculate the CF Multiple. If so, the CF multiple is 27.70 (154.30/5.57). I'm not sure I'm convinced if this is the right answer.
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Excellent!
Great video!! I have a question. How can I know the multiple of the current cash flow?
You gotta figure it out yourself cause usually this number is not reported on financial sites. First you must decide what type of cash flow you wanna take into consideration: it might be operating cash flow, free cash flow or a more accurated number that is Owner Earnings. I will use the example in the video so to find free cash flow go into section "Cash flow Statement" in the latest annual report of the company. Once there, search for the voice "Operating Cashflow" and subtract from this number "Capital Expenditures" that you ll find in the section below "Cash flow from Investing". Once you've calculated free cash flow divided the market capitalization with this number and you ll get the Multiple.
I have been investing in real estate for a while now and a lot of people talk about Cryptocurrency. Who else thinks this crypto trading is kinda easy but is way to nervous to start.
In a few months or no time people we definitely be kicking themselves regret for missing the opportunity to buy or invest in cryptocurrency.
@@emilyava4505 I wanted to buy bitcoin and trade but I still can't grasp the entire concept.
You don't need any one to teach you on how to invest your coins. You can make research on your own and start doing it yourself
>@@margotrobbie9166
Nice ⭐can you do as of yet non profitable, and if trading is worth it or vs hold..just throwing some topics out there. TY
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Where would you find the cash flow multiple in Guru Focus?
could you explain the multiples part as im still not sure how do i find multiples of a stock do i google it or is there a formula
Great video thanks
T̬̤̯ h̬̤̯ a̬̤̯ n̬̤̯ k̬̤̯ s̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ w̬̤̯ a̬̤̯ t̬̤̯ c̬̤̯ h̬̤̯ i̬̤̯ n̬̤̯ g̬̤̯ f̬̤̯ o̬̤̯ r̬̤̯ m̬̤̯ o̬̤̯ r̬̤̯ e̬̤̯ g̬̤̯ u̬̤̯ i̬̤̯ d̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ e̬̤̯ a̬̤̯ n̬̤̯ d̬̤̯ f̬̤̯ i̬̤̯ n̬̤̯ a̬̤̯ n̬̤̯ c̬̤̯ i̬̤̯ a̬̤̯ l̬̤̯ o̬̤̯ p̬̤̯ p̬̤̯ o̬̤̯ r̬̤̯ t̬̤̯ u̬̤̯ n̬̤̯ i̬̤̯ t̬̤̯ i̬̤̯ e̬̤̯ s̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ ?̬̤̯ *̬̤̯ •̬̤̯ w̬̤̯ •̬̤̯ h̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ t̬̤̯ •̬̤̯ s̬̤̯ •̬̤̯ a̬̤̯ •̬̤̯ p̬̤̯ •̬̤̯ p̬̤̯ *̬̤̯ o̬̤̯ n̬̤̯
*̬̤̯ {̬̤̯
Hey Cooper how do you find or calculate the "Current Cash Flow Multiple"?
Yeah, how do u find that figure?
Someone in the comments said take the current stock price / the cash flow ($5.57 example)
Thanku so much
what is if the Growth rate for example is the groth rate for xiaomi for the 1, 5, 10 years N/A ?
I think forex isn't for everyone though. And the learning curve will scare off lots of people. Bit I will say once you learn it you will be forever blessed
You're right ma thanks for introducing me to expert Louis Klate of financial education
People are scared of investing because of high rate of scam in the business
Nice video, I am up £12 k this month in my portfolio and I'm happy
Hey how did you get the 20x figure in regards to the stock for termination value?
👆📩
What metric do you use when you dont have a history or there is a negative cashflow as is often the case with new companies? Or is speculation your only option at that point
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The discounted terminal value is based on 11 years not 10 years. It should be $84.45 in this example by my calculations so the PV of AAPL is then $133.59, unless I've missed something
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From where did you get the 20 that u used it to find the Terminal Value?
Thank you!
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Thank you for this great video. I do wonder how you come up with a cashflow multiple of 26,9 and downgrade it to 20. Could you please explain that? Thank you.
I've been asking everyone here the same question. Let me know if you figure it out because it's kind of a big deal for this formula to work.
What I found on Google:
Cash Flow Multiple = 1/(k-g)
Where k = discount rate or cost of capital
and g = cash flow growth rate
Cash Flow Multiple -- Apple Example
k = 10% or 0.01
g = 6% or 0.06 (for the last 5 years)
CFM = 1/(0.01-0.06) = 25
If k = 10% and g = 5% then you'd get CFM = 1/(0.10-0.05) = 20
Hope this helps
@@johngomez7118 Thanks!!!😀
Could you please explain how we determine the terminal value?
How did you come up with multiple of 20? Is that just a random number after you hold it for 10 years?
Well the current multiple was 26.9 right? So in 10 years time it's likely to be lower. So that was an estimate. You could go with 15 if you want to be more conservative. It really depends on how pricey the market and company is, in the future.
@@thecooperacademy Wouldn't the curren cash flow multiple in the example be actually 154.3/5.57 = 27.7? I just want to understand were the value came from, 26.9 is not far from the ratio between current stock price and DCF free cash flow.
I also didn't understand where did we see 26.9 value? At 26.9 CF multiple, the current CF should be at 5.73 not 5.57. Correct ?
@@thecooperacademy where is the 26.9 multiple coming from? Watched this video over and over again trying to understand that. I've also seen it in the comments as a frequent question, but without answer. Can you help me out with that?
Great expectation
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Looking at WEB the cashflow growth rates are N/A. How do you calculate it when it reads NA?
Its important to compare the growth rate to other investment types (eg bonds/gold) so you can gauge value via comparison and choice of investment vehicles.
I just don't get how you got the 8% and 6% for growth rates. I understand that you looked at the past growth rates but I don't see how you get 8% and 6% from 16% and 8%
Yes, this is all technically accurate imo.
However,
Better to be vaguely right, than precisely wrong.
From a Berkshire annual meeting,
Charlie Munger
"Warren talks about these discounted cash flows, but I've never seen him do one"
Warren,
"Its true, if I would have to do a DCF, it's too close!"
How do you all determine your appropriate discount rate?
There is a bunch of ways. You can find the 10 year interest rate and then add a risk premium to that. Some investors determine the WACC (which i think is stupid). However I just like to use 10% as that's the return I want on a stock. The most important thing with discount rate is to be consistent & use the same variable each time. That way you can compare the stocks you analyse equally & find the 'best' opportunity.
Thanks for this video. How did you determine that Apple's current cash flow multiple is 26.9? This is the only part that I did not understand.
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Is it the PE ratio?
How did the Terminal Value change from $219 to $76 after put a discount rate of 10%. Whats the equation behind that calculation?
your video made this simple to understand the process therefore you earned yourself a Like. I have a question how did you get 6% in the 10yr column? i see where you got the 8% at. Please explain
I was about to ask the same question
Me question is absolutely the same, where they got the 8-6%?
where did he get the 8% from ?
I understood it as he was taking the difference between year 10 year and 5 year. Then using a slightly lower number because free cash flow slows as the company matures.
So I also had this same question and reached a conclusion. This might be clear to all of you already, but he is just making assumptions. He is assuming that the last 5 year growth rate might continue. Then it might slow down to 6% for the following 5 years.
Is there a way to download and edit this excel table please?
Just a beginner here, so apologies if this is a stupid question....
1. How did you get Apple's current cashflow multiple of 26.9 @5m55s in your video?
2. Also, @ 4m21s in video, you came up w/ 8% for first 5yrs & 6% for second 5yrs. Are you just shooting conservatively @ 14%? ( instead of adding 8% for first 5yrs and 8.2% for second totaling 16.2% matching the 10yr total?)
This is what I wanna know😭😭
Great video
how do u calculate Growth Rate? how do you come up with this 1.08 number? Will be appreciated if you could share me the formula on Growth Rate and Discount rate. I tried search for the formula in youtube and google, but cant find it.
Thanks for the video. How come you don't count in or mention a margin of safety? I see other investors and experts recommending and praising a solid margin of safety after calculating the intrinsic value, to give a buffer if you're wrong about the futute?
can you suggest any alternative to gurufocus ?
Bro how did you find the cash flow multiple of apple?
Hi! Can you tell me the meaning of $76.77? After you put the discount rate, it shows $76.77, but no explanation for that number. I would be very happy, if you tell me. Thanks. :)
Hi Jun. Basically even the terminal value must be discounted to the present. After have multiplied 10.95 * 20, calculate this: 219/(1.10)^11 = 76.77
Great video bro. But what if I wanted to sell the business In 20 years time?
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09:54
4 steps to caluatate the intrinsic:
(1) find the current cash flow
(2) determine the growth rate for this cash flow for 10 yrs
(3) find the terminal value in 10 yrs time
(4) find the discount rate for your cash flow (to discount them back to the present day)
Hey 02 MBA, it seems you understood this video very well. Maybe you can help me with a question:
At 5:51 he says:
"I've decided to use a multiple of 20 because that is lower and more conservative than Apple's current cashflow multiple of 26.9"
Where is this info coming from? (The number 26.9)
Thanks!
@@matthewmanucci that is the PE Ratio of Apple on the Date this Video was made.
So he supposed the PE Ratio for the Apple Stock after 10 Years will be about 20.
Where do I go to download the spreed sheet ?
Nice video but I like using the PPS or BVPS.
These skills should be taught in high school to our kids.
then kids will think how to make easy money just by investing in stock markets. we need people with skils that are useful for society.
Sir please make a video on ur education please so that we can purse the same in our future. Please Sir help us to get ur better future please 🙏🙏 🙏🙏
TH-cam is a decent way of getting education. I learnt more from TH-cam than university.
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@@thecooperacademy so please share ur collage degrees. Please 🙏🙏
@@vishalmalik5 TeXtMe 👆👆✌️✌️
How did you get Present Value (yearly)?
Also how did you find the cash flow multiple
The only thing I’m confused about is when he uses the 20, in the terminal value estimation. Where did he get 20 from? And is that an Accurate number to consistently rely on?