FULL EXAMPLE: How To Calculate The Intrinsic Value Of A Stock!
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- เผยแพร่เมื่อ 20 พ.ค. 2024
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In the video I share a full example of how to calculate the intrinsic value and buy price of a business with Facebook stock. FB is a company that has had tremendous growth over the past 10 years, but how will they grow in the future? And what can we expect as investors?
Throughout the video I use my spreadsheet to do some tricky calculations. The spreadsheet is available for free via the link below.
Intrinsic Value Part One
▶︎ • How I Calculate the Va...
Cash Flow For Owners
▶︎ • Cash Flow For Owners E...
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Disclaimer:
The information in this video is general information only and should not be taken as constituting professional advice from Hamish Hodder.
Hamish Hodder is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.
Hamish Hodder is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this video.
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Hamish Hodder 1. Market in China 2. deep look into BYD company 3. European market (UK in the future) 4. What is your view on risk
It will be nice if you can cover what sort of analysis you do after making an investment. Do you redo this intrinsic value calculation every quarter to decide whether to keep the stock or sell? Looking forward to more of your videos;)
textbooks, research, or basically any resource recommendations for investing
I would love to see you explain terminal value a bit more! Is terminal value an approximation for cash flows in perpetuity? Or just years 10-20? Or something else? In your NPV formula, it seems like we're calculating as if the terminal value of CF40 was all achieved in year 11, which is a bit confusing. Thanks!! Keep up the amazing videos :)
Hi. What is the formula for I-9 excel spreadsheet under Buy price per share? I don’t understand how that value came to be
Mate I love those in dept videos they provide a tone of value and in the long run attract the right people for your Chanel
Thanks for the feedback!
You are really good with understand these stuffs. I just found your channels today and subscribed. Very well explanation! Good work. Thank you for sharing knowledge.
Awesome coverage on finding out the Intrinsic Value of a company!Calculating future cash flows is pretty difficult over 10 years - let alone projecting just the next quarter accurately. The story of a company can easily change in the blink of an eye. Growth rates are tough to assume as you mention. It can get confusing for beginners, but you explained the concept great! Enjoyed the video!
Greeting Hamish, Just inquiring when are you going to post a video on terminal value?
Good video! I have a question. Does the intrinsic value of a company grow over the years using the DCF method as well? The valuations I make this year could be lower than when I valuate the company again with a higher Starting Cash Flow so I wanted to know you thoughts on this and how this affects investing strategy.
I am a beginner and I've found your channel is very educating and resourceful. Thank you .
Thank you for your example. However, you have calculated 5 different models. I also work with a range of values and I am wondering how you decide which one is the right Szenario to choose for your buying price...or do you view the buying range from model 1-5 as appropriate?
Thank you!
Great video! Question please: do you use ratios such as PE, etc. to make a more solid choice on whether you should buy or not? Thanks!
You made my day. Thank you !
I would like to see videos about Relative Value, Absolute Value, Received Value.
Great video mate, I'm understanding more and more. Keep it up!
So glad you're learning!
This is a fantastic video. So useful. Could you update this video now the 2019 10-K is out? It would be really interesting to see the progress, especially as growth is down.
Keep the good work mate.
Cheers
Let me ask you a question.
When you are a long/small term investor/(my case), and doing investments every week, do you think that price is still important?
What do you think about dollar cost averaging?
Now you're cooking mate. Brilliant breakdown and example to booth, more of that! Excellent video.
Thanks for watching!
Great video Hamish! Once you arrive at a MOS price, do you require that a company be experiencing an "event" to further substantiate the purchase? Or is hitting your target price enough. Phil Town mentions that if a company is at the MOS price with no event then there is probably something else going on that would explain the price and he would not purchase the company at that time. Your thoughts? -Thanks!
The buy price per share isn't working on my Excel. Do I calculate It manually by dividing the "Buy price" by the total outstanding shares of the company?
Phenomenal video! A+
Mighty generous of you to share your thoughts in so much details. I'm just speechless.
Hi Hamish, Thanks for making such great videos. Have you uploaded any video that explains how to evaluate projects to determine wether a company should invest them vs others that don't ? these evaluations are mostly related to making a capital budgeting decision using NPV, WACC, IRR, etc.
Hello, how can you tell if a stock is undervalued? For every stock I analyze, the intrinsic value always reaches $1 trillion which is extremely large. I’m not sure about it if it’s broken or something.
Outstanding video I like these live examples. Unlike Facebook, there will be shares that come within your Intrinsic Value range. There are some gold nuggets still available. Thanks again for sharing the video.
Thanks Hamish, the video helped to reinforce your email explanation! Very much appreciated and makes full sense now!
Glad to help!
Hi Hamish, great information.
Just wanting to know why you chose to combine rate of return required with margin of error ??
Awesome video Hamish, great example of how to value a company!!
For the growth rates of 10%,12%,14%,16%,18%
What made you choose these numbers?
For these growth rates, are these numbers the eps growth rate or the free cash flow growth rate or something else.
I have no background in finance. Can I ask, is that risk-free rate has another name called perpetual growth rate? Or are they different things? If yes can I use the inflation rate for it? Also, can I use WACC as the required rate of return? Because I have seen it used elsewhere. Thank you for the great educational videos!
When do we use dcf valuation and when should we use earnings multiple valuation? Coz some companies are growing without cash flows and some have steady cash flows
Best video on youtube!!!
Best subscriber on TH-cam!!
Thanks Hamish! I followed your example to the teeth but for some reason the spreadsheet gives me a buy price of 10 times what the stock is right now. To put things into perspective, it's the most expensive and overvalued stock at this point according to various analysts! Where did I go wrong?
YOU ARE AWESOME, A REAL KING! GREETS FROM BRAZIL!
Great video! Thank you for the information. Can you also do a video on how you calculate ROIC and ROE.
Definitely!
Im a little confused how to find buy price. What is the exact formula to find buy price? Also, for intrinsic value are you not doing CF/(1+r)^n? I am getting values close to the ones shown but not the exact same
Man your are a life saver. So much bullshit is on internet. I am so blessed to have found your vidoes.
could u please explain what values to put in the spreadsheet to find growth rates?
Great work as always. Really looking forward to maintenance capex calculation methods.
Thank you! You can expect a video dedicated to maintenance Capex in the next couple weeks :)
Another great video Hamish, well done!
Thank you!
Please make videos about other important fundamental ratios as well.
So i have a question, you say discount future value of cash flow in next 5-10 year to present year, does that mean stock market think 5-10 years ahead in future?
Hey mate, by growth rate do you mean the growth of sales or the company as a whole?
Hey hamish just starting dcf, what is intrinsic value suppose to be? Isn't it the same as buy price?
HI Hamish, Thanks for sharing free Intrinsic value calculator. However, I found that the latest 10 yr 2022 version seems to have broken formula with fair value per share and buy price per share columns. Numbers doesn't change despite the growth rate percentage and year 0 columns data are changed.. Could you please have a look into it? Thanks
Brilliant content.
Serious question. Why would we use owner’s earnings, minus maintenance capital expenditure instead of using net income? Wouldn’t net income already have the capital expenditures deducted?
Does Phil Town explain this type of analysis in one of his books? I read rule 1 and invested. In those books, Phil Town and Danielle Town, explained Ten cap (owner earnings x 10), Payback time (accumulated FCF accumulated for 8 years compounded by future growth rate) and MOS (future EPS x Future EP divided by 4 and then subtract 50% from the result for the safety margin) . Why does he not explain this type of analysis and what do you think about calculating intrinsic value using the methods mentioned. Right now I'm starting payback time but I don't think they explain this kind of analysis. I just have a few months in this and sometimes it's a bit stressful since each method gives me a very different valuation so I don't know which one to base on. Sorry for my English, my main language is Spanish.
I didn’t get how aiming for 22% covers you. Which is the margin of safety? If you aim for a higher return does the stock price reduces in your calculations?
Hey Hamish, love your work and thank you for showing us an example. Just wanted to ask, towards the end of your video, are you able to explain, using the Facebook example, does this mean to buy Facebook at a price range between 99-160 or what does that table mean - hope that made some sense? Thanks
That is the range you would start buying, if those growth rates were accurate, and if your target return was 15%
Great video!!! :D
I just seem to get intrinsic value that is lower than the stocks ever been in most cases. Love the idea and it possibly may work, it just seems for Canada it doesn't do too well.
how would you calculate net borrowing?
Question for anyone here:
I am loving these videos and have watch (to my understanding) all the value investing videos Hamish has done, thanks Hamish!
I cant seem to figure out what the "Buy Price Per Share" actually indicates? Maybe i need to watch more videos but why do the values go down as the interest rate of return goes up? It seems like a more conservative investor would want a smaller rate of return in these cases, not 22%. Thanks in advance to anyone that can help me out with all this.
The interest rate there is discounting the present value of future cash flows, that’s why the price is going down.
Normally you use a discount rate to include opportunity costs, risks and also the costs of growth for the company..
A thumb rule is to have 10% as discount rate..
Hope it helped :)
Hi Hamish. Do you mind sharing the spreadsheet. Thanks
I think your discounted cashflow formula on the spreadsheet is missing power to time (^t) and multiplies instead of divides. DCF = CF1/(1+r)1 + CF2/(1+r)2 + CFn/(1+r)n. Just a heads up.
Can you point me towards good value research based portals
Is this spreadsheet compatible with MacBook
I usually do DCF by hand so I was looking to use this spreadsheet! One question though, in the data entry section where it says "Sales" are you referring to revenue(I assume so) or something else?
Yes revenue
I have a small note on your spreadsheet . you discount the terminal value to the 11th year .i think it should be discounted to the tenth year ...I mean : pt/(1+i)^10
because the terminal value is 10 year time distant from present day
HEY What is the formula for excel spreadsheet
Dude, thank you. I get lost when the hypothetics come into play
Is this the new and only way of getting the intrinsic value ?
I have a small note on your spreadsheet . you discount the terminal value to the 11th year .ithink it should be discounted to the tenth year ...pt/(1+i)^10
So, what price did you come up with for FB?
Wonderful video. However, I still don't really understand how you arrived at growth rate between 10-18%
Why are you not including all the capital expenditures?
Multibagger case study...
For sure!
Big fan of Peter Lynch’s multi-bagger theory! They are out there, you just have to find them. He has great investment tips which I used in one of my videos.
I personally think Fiverr has potential to be a multibagger after it settled a bit after it IPO’d last year. Time will tell. Nothing is guaranteed. Keep the videos coming Hammish! - Michael DeRiso
Hello...i have a question in which I need some help...the question is.....
1. A company's last dividend was $1.25 and the directors expect to maintain the historic 4 percent annual rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent for the next three years and the stock will then reach $25.00 per share.
i. How much should you be willing to pay for the stock if you require a 16 percent return?
ii. How much should you be willing to pay for the stock if you feel that the 7 percent growth rate can be maintained indefinitely and you require a 16 percent return?
I am not able to figure out which formulas to use...Will appreciate if any one will help me with this question 😊😊
Can you share an example excel sheet used? Looks great
th-cam.com/video/hBX4sOWolLQ/w-d-xo.html
It will be nice if you can also cover options trading.
My query is how to account for the debts in this intrinsic value calculation.
Why don't you use 23% as the required rate of return? That would be closer to 8 times (7.9) or something.
I would like to know the answer to this too. Good Question
I like this valuation method but Why can’t you just find out the book value per share and base your entry point on that
Hey man is this the same method Warren Buffet uses? thanks
Buffett has said that his method is to estimate the total amount of cash that a business will return to shareholders over its remaining life, discounted appropriately. This method is the common interpretation of what Buffett says he does.
Not sure why you didn't use an FY FCF number and wanted to use Q4 then Q1,2,3. Companies work to FY and key decision and new projects etc are done, kicked off once funds are released.
Better videos online as this is not accurate
@@jay2dap64 Can you suggest some? I watched videos for like 16 hours yday and couldnt find any solid ones. The search is real. lol
Great video Hamish. Could you comment on the FastGraphs platform (can get a free trial if you want to check it out)? They provide a somewhat similar analysis but visually. I appreciate your opinion.
Why don't you deduct tax from owner's earning?
I just started reading rule 1
That's awesome!
you used real data and got wrong numbers? can you explain cus I get "wrong" numbers on every stock I am entering
liked in advance
Can you do it manually and explain please ?
arent there gurus out there that can calculate this for us.
Hamish... this 50% margin of safety is more than double Warren Buffets 20% margin of safety. This could potentially keep you from buying alot of good stocks. why not use a lower margin of safety like 25%...???
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