DCF

AP9384629344432

I don't call things 'screaming buys' very often, but here was my DD [on Feb 19th](https://www.reddit.com/r/stocks/comments/1auk8nf/rstocks_daily_discussion_monday_feb_19_2024/kr6cut1/), then [Feb 29th](https://www.reddit.com/r/stocks/comments/1b2x8gt/rstocks_daily_discussion_options_trading_thursday/ksrcxbl/), and [March 13th](https://www.reddit.com/r/stocks/comments/1be8jis/the_fundamental_case_for_celh_there_is_value_in/). I went back to one of my [DCF models](https://i.imgur.com/TQXpnf9.png) and tweaked some of the assumptions. In particular, I slowed 2024 growth to 50%, noting that the 37% figure we saw in Q1 reflected some one-(or two)-time inventory shifts that would have otherwise resulted in 60% growth. However I only give them 2 years of 50% growth, then 2 years of 40%, then 30%. I raised my assumptions on EBIT margins as last quarter showed a surprise increase in margins across the board. In fact, their EBIT margin was actually 26%! The TTM figure was 22%. They did warn the margins would fall in the summer due to promotional activity, so 26% is probably the peak for the year. To be conservative I assume they maintain 2 years of 22% then rise to 23% (enabled by economies of scale + international price increases). As always, capex is basically negligible since they outsource the distribution/bottling to other companies. And I stick to my final year exit multiple of 25. That gets me to a 108 per share value. [My 'very bullish' model](https://i.imgur.com/jQk0OFN.png) gives them 3 years of 50% growth and 2 years of 40% and gets a $124 fair value. Finally, I show that if we [take down our revenue estimates to assume what we saw in Q1 is the new normal](https://i.imgur.com/SH4YjGn.png), say 40% for 2 years, 35% for 2 years, then 30%, the fair value is $89, or just under today's price. So that's an approximation of what the market is pricing in. In all 3 of these models I use a 15% discount rate, so the IRR is still decent in all 3 cases.

tachyonvelocity

Not fraud, just stocks are traded at the margin, meaning if enough market participants decided a company should be worth X amount at a specific moment in time, then it will be worth that amount. Usually there is way more liquidity that stocks trade fairly close to a "true" value based on DCF. But sometimes you can get opportunities because everyone is fearful during crashes or exuberant during bubbles. As an aside, for billionaires like Elon, the reason why we don't tax wealth is because that wealth is unearned, Tesla is worth billions because at this moment it time, the last buyer and seller were willing to pay at this specific price. It doesn't mean that Elon's billions can be cashed out to everyone else. There is not enough billions in demand for Tesla shares that it could be cashed out in a short period of time, it's even more true if you count all the trillions the other companies are worth.

datafisherman

Yes, it is an interesting issue for certain. I suppose I mostly sidestep it in practice by not doing DCFs. When I do DCF-like models, it is usually to analyze capital allocation - whether that's reinvestment, M&A, debt repayment, or buybacks. It can help you visualize changes in WC as a consequence of growth or anticipate the need for external financing. I never discount explicitly: 2-yr double is ~40% annualized, 5-yr double is ~16%. Those are sensible goalposts: anything less isn't worth touching, and anything more doesn't need math. Turning everything into a logarithm or exponential equation tends to make the mental math much easier too. I think you're right about the fun math, but it may be less tractable math than math-oriented fun. At any given time, each allocation option has an associated return. Some have many component returns: for instance, different internal reinvestment opportunities, different debt to repay, different acquisition targets. But each has a return and outlay. Rank them by highest return, and do the top item on the list until you outlay all you can on it. Repeat until you run out of money. This is simplified, but it tracks the truth and is slightly more helpful (although less accurate) than 'it depends'. If earnings yield is 6%, ROIIC is 14%, and paying 9% on debt, the optimal order is: internal reinvestment until no more opportunity, paying down debt if allowed and otherwise desirable, but probably never repurchasing shares. If earnings yield were instead <5%, and whatever debt could not be repaid early, then the next best thing would probably be holding as cash, collecting the interest, and retaining the option-value. That might change if short-term interest rates did. Alternatively, imagine a no-debt scenario: perhaps the earnings yield is still <5%, but there are several tuck-in targets acquirable at <20x earnings. That earns above cost. More so the lower the multiple paid or the better the acquirer could run the business. Issue stock. Cash earns >5%. Debt probably costs >5%. However, shares yield <5%. It's the cheapest financing method in that case. If there were existing (and repayable or repurchasable) debt at 9%, you would probably not buy any business for >11x earnings (unless you thought you could reduce the effective multiple paid by improving the cashflows upon acquisition). The math is often simpler than expected, but the relentless application of the logic of opportunity cost to capital allocation decisions requires constant quantitative reasoning. This underscores your final point: long-term investing is all about the markets you choose to operate in, how you structure the business, and who you pay to run it. Over long periods of time, it is all about capital allocation, and these three factors most significantly define the opportunities and constraints for capital allocation in the business. Management is the agent that avails of these opportunities and works within these constraints.

datafisherman

This is my gf's birthday weekend, so I will be less indulgent in investment theorizing than usual. Expect a more thoughtful reply sometime tomorrow. I broadly agree with u/pl_fanat1c, but the most straightforward way to handle it is do a DCF on the shares, not the enterprise. Use EV for your multiple, but make your output share price, not EV (or market cap). If you wanted to be conservative, just reduce debt instead of touching share count. Eventually, you'll start earning your interest rate, rather than paying it - this will lower bound your return on the buybacks if other conditions are present (mainly, shares are undervalued). &nbsp; For u/AP9384629344432, a formal reference on how to generally think about it: [Cost of Capital & Capital Allocation: Investment in the Era of "Easy Money", Michael Mauboussin & Dan Callahan (Feb 28, 2024)](https://www.morganstanley.com/im/publication/insights/articles/article_costofcapitalandcapitalallocation.pdf) In particular, pages 9-12. This helped clarify my thinking on the matter, but otherwise I would suggest reading Thorndike's *The Outsiders* for an even more general approach. &nbsp; Now, the dishes await!

Spins13

People say the market is efficient but even the most sophisticated AI today cannot run a DCF

Swamivik

It isnt about the fact that they have a great product but that their company valuation is far too high. If you look at TSLA DCF valuation, it should be priced at $60. 80% of Tesla revenue comes from selling EV despite Musk telling you otherwise. So the only way to justify its share price is the promise that self driving will work. It is already being priced in. If it doesn't work, you are fucked. Then look at the headwinds. Tesla is losing market share in US, EU and China. China accounts for 30% of Tesla revenue and it's sales is dropping like a stone. They are literally cutting their workforce. It is not a company with slowing growth but a decrease in growth in the EV space. Now let's look at self driving. Tesla has first mover advantage, but other companies are catching up. Just like EVs when Musk was laughing at Chinese EVs not long ago, now he says it is an existential threat to US EVs unless tariffs were in place. With self driving, 3 companies in China has bought out their system already, Huawei, Li Auto and Nio, not to mention Mercedes with their FSD 3. Other companies are developing their own self driving system too, and there will be competition. So you are already priced in FSD works, and Tesla will win the self driving war. Not even going to mention how Musk is single handily, turning off people from buying Tesla and how his salary if approved would literally dilute shares by 10%. Not even a margin of safety, you are literally buying Tesla at this price based on hope and that it will work. There is a negative margin of safety.

fkfjjfysgr

Here is what I posted elsewhere: I think is it’s worthy PSA. Before reading, I ask you is Apple a buy at ANY price? If not? Then what is a fair price? If you can’t answer that then it should not be a meaningful part of your portfolio… I would sell a lot a bit. Much better risk adjusted bets out there. And that’s all investing is… what is the cash flow I’m expecting to get, what’s the risk that cash flow gets delivered and what am I paying for that cash flow. Apple is a company that has a high degree of certainty of cash flows (high valuation) and low growth. That means a low discount rate of future cash flows. The worst combo of investing is low discount rate and low expected growth of cash flows. Apple is in this sweet spot of low upside. Another negative is that it is a large % of indexes so it gets bought indiscriminately by vanguard/etc. This pushes the price up in the short term but leaves it vulnerable to any disappointment in cash flows delivered (earnings). My point is given the high valuation and low growth prospects given the size it is counterintuitevly a high risk play. Could it go higher? Yes. Could they innovate and create another revenue stream? Yes. Have they done this under Tim Cook’s reign? No. They are sitting on mountains of cash and have nothing better to do than buy back shares. Or it’s trapped off shores and they can’t use it. Based on all my background Apple looks to be at the end of its life cycle. Companies at the end of their life cycles (especially those with an installed base like apply) always have great recent returns that give investors comfort. It’s this very comfort that drives their valuations beyond what a reasonable DCF would suggest is fair valuation. This high valuation eventually leads to low prospective returns because investors become impatient with the low cash flows and no longer accept the low discount rate (mentioned earlier) that was applied to those cash flows. So even if they deliver cash flows as expected it’s not enough. Apologies this was bit of a rant but at the end of the day any investment is the present value of future cash flows. You have to decide as an investor what discount rate you’re comfortable accepting for a set of cash flows and if you find an alternative then you will as a rational investor shift your funds. This is where a stock with low growth and a low discount rate has a LOT of downside (AAPL). Edit: and to anyone that has read this this is from someone that has dedicate 2 decades of his life to investments (CFA charterholder)… ALL that matters is expected cash flows and the discount rate being applied… if either of those change then the stock value will change (typically during earnings releases). What was just reported only slighter matters in that it says whether the company lived up to guidance and what does it say about what they can do in the future. Everything else are inputs to these 2 variables. Once you understand that it becomes a lot easier to evaluate companies. Apply a higher discount rate to less reliable cash flows. I’m guessing 3 people will read this but you’re welcome.

fkfjjfysgr

I would sell a lot a bit. Much better risk adjusted bets out there. And that’s all investing is… what is the cash flow I’m expecting to get, what’s the risk that cash flow gets delivered and what am I paying for that cash flow. Apple is a company that has a high degree of certainty of cash flows (high valuation) and low growth. That means a low discount rate of future cash flows. The worst combo of investing is low discount rate and low expected growth of cash flows. Apple is in this sweet spot of low upside. Another negative is that it is a large % of indexes so it gets bought indiscriminately by vanguard/etc. This pushes the price up in the short term but leaves it vulnerable to any disappointment in cash flows delivered (earnings). My point is given the high valuation and low growth prospects given the size it is counterintuitevly a high risk play. Could it go higher? Yes. Could they innovate and create another revenue stream? Yes. Have they done this under Tim Cook’s reign? No. They are sitting on mountains of cash and have nothing better to do than buy back shares. Or it’s trapped off shores and they can’t use it. Based on all my background Apple looks to be at the end of its life cycle. Companies at the end of their life cycles (especially those with an installed base like apply) always have great recent returns that give investors comfort. It’s this very comfort that drives their valuations beyond what a reasonable DCF would suggest is fair valuation. This high valuation eventually leads to low prospective returns because investors become impatient with the low cash flows and no longer accept the low discount rate (mentioned earlier) that was applied to those cash flows. So even if they deliver cash flows as expected it’s not enough. Apologies this was bit of a rant but at the end of the day any investment is the present value of future cash flows. You have to decide as an investor what discount rate you’re comfortable accepting for a set of cash flows and if you find an alternative then you will as a rational investor shift your funds. This is where a stock with low growth and a low discount rate has a LOT of downside (AAPL).

think_up

I usually shave off 20-30% then you’re in the ballpark. Do your own DCF or other valuation and you probably won’t be as optimistic as they are.

ArnoldRothsteinsAlt

If you’re a bear giving long term spy targets like sub 200 but you can’t talk your way through explaining a DCF at the very least, your opinion basically holds as much weight as single ply toilet paper in the rain.

TonyBerdata27

I have about 1.75k in calls right now, might paper hand down to about 1k if selling pressure continues until market close. I've done extensive research on Arm for one of my finance classes \[a 30 page report that I turned in yesterday lol\] and tbh when you go the numbers route, DCF, multiples and everything in that area tells you the company is wildly overvalued. The thing is, last quarters quidance was so good that I am pretty optimistic about this one. To quote the CFO from the conference call; he “expect\[s\] momentum to accelerate through Q4 and beyond.”, and it was reiterated quite a few times that record revenues will continue as royalty rates increase alongside unit growth. We'll see tho, meet you after the closing bell :)

TrashPanda_924

Not really. The sell off isn’t due to underlying risks in the economy. By pushing rate cut expectations out, you caused a re-evaluation of equity prices from a discounting perspective. The market is still relatively strong. Imaging a ginormous DCF exercise for every company and all the discount rate on each one simultaneously gets changed in Excel. All valuations go down, but nothing has been changed in the assumptions tab around prices or quantities sold.

gls2220

Does anyone have a link to a good DCF template, preferrably one that doesn't require giving them my personal information so that they can try to upsell me?

CompetitionSoft4944

Hi, Someone was so kind to help me yesterday, with a problem I couldn't solve. I am making a DCF valuation and wanted to confirm it through a RIM or EVA valuation using the same input. Neither my RIM or EVA valuation matches the DCF, even though I use the exact same forecasted balance sheet/income statement. Any idea what is typically the issue? Or is it a mistake in the forecast? All my forecasts is based on revenue growth, or a driver linked to this :-)

LittlePlacerMine

I should disclose I almost never do CSP’s. If I want to do a put I’ll use a bull or bear put spread. I try to avoid earnings. For traders that are working with a small account my strategies may not be the best use of their time as it won’t generate the 2x+ returns a lot of options traders want. I’m trying to enhance a portfolio’s return by using options on 10% of my portfolio. If I was just starting out (and had already learned the hard lessons) I would be focused on low capital/high probability returns using spreads or calls. My favored tickers Change from week to week. This week: Albermarle -ALB IV 41% FMC. - IV 76% Crispr Therapeutics - CRSP IV 103% I start with a list of undervalued names collected from several sources. Then I narrow them down for implied volatility that looks rewarding. Usually end up with 8-12 tickers. Then high level research each ticker and score them based on discount to valuation, earnings dates, options depth (spread), intrinsic/extrinsic potential (Prefer OTM in rising markets, ATM in neutral and ITM in slightly bearish markets). Once I have a short list (usually 2 or 3) I spend a ridiculously inordinate amount of time reading analyst reports, 10-Qs, comparing them against competitors, running news scans and attempting to gain a perspective on the short and long term. I also look at momentum for grins. My preference is OTM covered calls on stocks that are moving up to try and capture both an increase in the underlying and the premium. I can usually get 2 or 3 round trips on a ticker before the situation or the volatility changes and it’s time to move on. I’m like you though, if it isn’t something I am comfortable about owning outright I get wary. This strategy isn’t perfect and occasionally I do end up trying to be comfortable with owning the stock 😃 I also look for anomalies in the option prices that seem to occasionally crop up in stocks that don’t have good options depth and the market makes have left to algorithmic pricing. These are usually <$10 stocks and the mispricing is fleeting. As an example LAAC, a lithium mining company trades around $5. A quantitative DCF rates it a screaming undervalued buy, what little analyst coverage there is target ranges from $5.60 to $29. It only has 2.50/5.00/7.50 monthly strikes. When the dte is roughly 30 the options tend to run in the 0.12-0.25 premium range. When it goes OTM it can be an attractive 5%-7% return. When it is ITM it seems to drop to the 3% return (all <31 DTE). The quotes seem to violate the BS pricing model. I’ve talked about this with an industry insider and he said it’s because the thin market in options leaves the market makers required to cover the stock no choice and the high frequency guys won’t trade it. So the MM has no real choice but to run it using algorithmic pricing. Or simply put it isn’t worth their time to manually control it. I will say these situations appear and then disappear, when it shows up in a scan I look deeper but half the time discard it. But that said I did a couple of round trips on LAAC picking up 5% premium plus another 4% intrinsic gain. And now the pricing has gone rational.

LittlePlacerMine

I stay away from tickers that are trading near or above their DCF Valuation. My estimates for SHOP are in the mid-60’s. I like a bigger margin of safety than this - more like 15%-20% undervalued. But good luck!

CompetitionSoft4944

Hi, I am new at making valuations. And I have a question, so if anyone would help a rookie out I would be so grateful! :-) I have forecasted a balance sheet and income statement for a DCF valuation based on Koller et al. 2022 (McKinsey book). When I made the forecast, I forecasted revenue growth, and let all other items on the balance sheet and income statement be forecasted as an average % of revenue, COGS, etc. So everything should be tied up to the revenue growth expected. When I consider my margins and ROIC for the forecasted period, they are stable, aligning with historical margins/ROIC. But when I consider the reinvestment rate it is much lower than previous periods. Any idea why? :-) I would have thought that the reinvestment rate would be stable, because all parts of it is connected to revenue :(

Ok_Sir4964

Lode Gold: Quick summary:   1.      Now: $14-16MM (share price doubled) with no promotion (yet).  Spin co to further unlock value upcoming – valuation +$8MM, pre-money/post assets vend in.   Assets: RIRGS (what snowline has, early); Geological Analogue to New Found Gold, Dalradian. 2.      May raise funds in the parent co and move it to spin co (ready to trade before September) – each shareholder of parent co will get shares of spin co via plan of arrangement 3.      Cali M&A focus – right after spin co…   best to discuss live. Staged deal is better; then 100% as current key shareholders (3= 59% and 4=63%) would like to fund pro-rata.   There is an M&A project /”Step 3” of the Restructuring and Growth Plans- Sale/JV of a Au asset with NPV $370MM (500km from Ross Beaty’s Castle Mountain – which he paid $200MM in 2018).   Background: ·        Lode Gold has 3 key assets. 1: Cali Au 1+2MM Oz PEA USD $370MM; 2: Yukon and NB assets (Market Cap $30MM in 2020) ·        In November 2023, the market cap was $3.3MM. We did a positioning round for $1.5MM (over subscribed at $2MM).  We closed March 15; the stock has almost doubled. Market cap today: $14-16MM. ·        Three key institution shareholders (2 are on the board) are leading each round of financing; supporting the plans.   Status: ·        executing on plans.   ·        evaluating launching a $3MM raise pre spin co. Each shareholder will get shares of spin co. ·        spinning out 3 assets into a new pub co (these assets were $30MM in 2020). ·        Spin co will be $8MM pre money.  Assets: RIRGS confirmed in Yukon.   Geological analogue to New Found Gold and Dalradian in NB.   See NR’s: News - Stratabound Minerals – new website under construction.   ·        Valuation of Lode Gold has gone from $3.3MM in Nov 2023 to $12-14MM (share price has almost doubled since March). ·        Per the Strategic Plans (signed off early October), we are on point in executing the restructuring and growth initiatives:      o   Step 1: Raise $1.5MM/Completed with $2MM o   Step 2: Raise $3MM on new spin co at $8MM pre money and; o   Step 3: $XMM for 50% of Cali                    Lode is initiating conversations(Step 3) – ahead of schedule -  during Round Up with PE funds and 100,000  oz /year Producers re: Cali Asset – presently, we are completing CAs; table top DD to prepare for Mariposa, Cali site visits May 13-15th (post Canaccord conference).   Quick recap – About  Fremont:   1. Cali - Fremont go private(or “dark”). $6MM* ASK, 50% (initiated softly at Round Up in January/Step 3 of Strategy Plans – ahead of schedule)    * that was based on $7MM market cap. Current market cap has gone up to $12MM; which means 50% = $11MM (using the same 8.3% discount). Asset level valuation is USD $370MM at sensitivity price $2000 per oz/au.  Note: We were $3.3MM market cap in Nov 2023; now at $12-14MM. Price per share has doubled.   2. Now, funded (per #1) and debt free; we go dark/quiet to do the work in Cali per discussed - key levers that could result in taking this from ~$20MM to $100MM potentially (Equinox Gold bought Cali Assets for $200MM).    There is a step by step strategic business plan that we will be executing.   3. Geological Model (Work-In-Progress): At high grade, 1M oz at 5gpt (3gpt cut off); Potential: 6x. 5 veins  >20 gram meters.  Widith: Up to 10m.  More work needs to be done. Thesis needs to be tested with 4500+ m drilling, planned for 2024/2025.   Topline re Fremont:   ·        100% owned private (not public or BLM) land: 3351 acres.   ·        Located on Mother Lode Belt (50,000,000 oz produced); ~500km from Castle Mountain, Equinox Gold.   ·        Excellent site infrastructure with hydro substation, highway access, proximity to airports and seaports.   ·        Historical California Lode mined in 40’s at recovered grade around 8gpt.   ·        ⁠Mining operations suspended in 1942 due to prohibition on gold mining during World War II.   ·        23km of underground workings ($100M replacement value), 42,000m drilled.    ·        Underpin: PEA 2023 at sensitivity $2000 Au/oz: NPV USD $370MM with IRR 31%, DCF 5%. Current: 1M (Indicated) + 2M (Inferred) oz (PEA 2023).   ·        Geological Model (Work-In-Progress): At high grade, 1M at 5gpt (3gpt cut off); Potential: 6x.   ·        MRE evaluates only 1.4km of 4 strike with continuous gold in soil anomaly. Only 2 of the 5 known deposits have been exploited. Potential for material upside.   ·        ⁠Orebodies -consistent with many other known prolific orogenic deposits -are structurally controlled with high grade plunging ore shoots.   ·        Some deeper drilling (3 step out holes) has confirmed continuity of mineralized structure to at least 1km depth.    ·        ⁠Conceptual modelling, on a probability weighted basis, demonstrates potential for resources > 2Moz @ 5gpt.   ·        ⁠Drilling ~4500m planned to confirm thesis of high grade underground potential.   ·        Significant upside exists for a much larger lower grade resource encapsulating the higher grade resource and this could lead to a bulk underground mining scenario to compliment a more selective higher grade starter mine.   ·        Additional: An open pit 2gpt resource of 1+2M oz already in inventory with a positive NPV / IRR per PEA 2023 .   Summary: Possibly 2M oz high grade - low capex underground mine, expanding to extract 5M oz of lower grade bulk underground mine potentially, followed by large open pit and with still significant amounts of oxide potential.  

Helpful_Economics214

Check out my TTWO analysis with DCF valuation. TTWO to the moon. [https://open.substack.com/pub/zvanovec/p/en-3-take-two-interactive-software?r=mq1b3&utm\_campaign=post&utm\_medium=web](https://open.substack.com/pub/zvanovec/p/en-3-take-two-interactive-software?r=mq1b3&utm_campaign=post&utm_medium=web)

Murphy_1827

Because you know nothing and would have no idea what I'm talking about. Do you realise people dedicate years study this? Do it professionally? You would not understand me telling you about the fama and french 5 factor, DCF analysis, Gordon growth model, accounting ratios, PESTLE ect. Forget that, lets start with don't get financial data off Wikipedia? "How many years are enough"---hilarious, if only you knew. I'm assuming your like 12-16 in which case maybe learn this stuff if you're interested by it... but do not pretend to have even a modicum of understanding if your response to a obvious absurdity is "anything is possible", that actually made me laugh.

nate2337

It’s not about large caps and debt, it’s about how DCF valuation works, which is the most common form of valuation for publicly traded equities. And more specifically, it’s about the impact of a much higher risk-free rate on the valuation of high growth (usually tech) companies that are not yet generating positive EPS.

ThinkingOfTheOldDays

expensive stocks take a blow when rates rise in DCF models.

tech01x

Well, it is really about the 5-10 year DCF and the probabilities on those projections. So of course, sentiment and forward outlook plays a huge role.

but_why_doh

Ok these are all significantly different businesses in very different sectors. You've got a few cybersecurity companies, a military company, and zoom. They all grow at VERY different rates, and are in different points in their lifecycles. Zoom is more of a value stock and less of a growth stock. For a valuation perspective, a DCF is the best way to evaluate these companies. A DCF will always be a solid way to value companies.

Disastrous_Aside4295

Step by step youngin….you gotta rejigger the DCF models first….then the market has to reprice ie go down…then get bullish 👍👍

MasterofPenguin

1) I don’t publish my DDs, although I sometimes seek feedback on my ideas in public forums. 2) if you believe in efficient market theory (“everything is priced in”) how would anyone ever make any money? You have to develop a variant perspective to what the market has (this stock is over-performing/under-performing), I believe in value investing, even though I’ve certainly “left money in the table” or been wrong, or even made emotional mistakes in the execution of my plans. 3) because I believe in value investing, I do my own 5-year DCF projection based on published 10-Qs and other SEC filing’s, (although I’m not opposed to stretching it out longer if, for example, I think an unprofitable company will become profitable in year 7 instead of year 3). Then subtract out debt to find equity value and divide by # of shares outstanding to find implied stock price and see how that is relative to the market.

TheM3ssenger

Your terminal capex should be equal to terminal depreciation in your DCF, as a rule of thumb. It’s unrealistic to assume will not invest enough to maintain the value of their assets.

1234567panda

I remember doomers were calling for a massive collapse in valuations as rates went up and stayed high. “My DCF model is saying stocks will go down 50% due to higher rates” lmao yields at 5% and multiples still at ATHs 

Glittering-Dog-7644

simply wallstreet likes it based on future DCF https://preview.redd.it/bv69mcd30uwc1.png?width=1714&format=png&auto=webp&s=758ce61cc18fed49510ba95ce8c00c99340d1a55 not advice, its just an estimation by a computer made by a person

Old_Man_Heats

Actually i'll have you know my DCF says 240 when i facesmash the keyboard so you're wrong

Tesla_lord_69

Model 2 getting an early date of release changes the DCF model. Bears still thinking about muh PE ratio!

Malamonga1

you're not exactly buying high here. EV is like the second most hated sector right now. Most hated is probably solar. Aswath Damodaran did DCF valuation for Tesla a few months ago and said TSLA fair value is around $180, and it was easily the most fair valued stock among the magnificent 7.

_hiddenscout

100%. The way I invest or think about companies is really more about fundamentals rather than price than anything else. I respect people who do DCF's, but even then, you are kind of guessing a few years out and business cycles themselves are hard to predict more than a few quarters. Rather than worry about price, I worry about the price I am paying in terms of of the value of the company. Like personally, I try to buy things with PEG's under 2 if possible, but have my screener set up for 3 to try to catch more names. As long as the current fundamentals support the price, then I don't mind buying. Like there is a company that I'm long on that reports after bell close today, $LRN. They are online education. Something I thought I would never buy, but the company is actually pretty solid. Has like little to none analyst coverage. It's extremely cheap: [https://finviz.com/quote.ashx?t=LRN&p=d](https://finviz.com/quote.ashx?t=LRN&p=d) Also last quarter they reported higher enrollment rates than before covid. EPS growth is really solid, revenue growth is high.

Who_You_Know

DCF analysis - Calculating price point set for the new drug with annual gross price of $450k gets me to roughly $45/share although potential commercial opportunity is realized over 4-8 quarters. That’s dependent on a broad and clean label, side effects noted as part of trial findings but not included in black box warning. If there is black box warning, assumes price point stays the same but decreasing US/EU/Japan penetration by 10-20%, DCF is closer to $21/share (still 40% upside). Post the drug approval, I’d likely trim a good bit as commercial opportunity may take some time to ramp up.

mrTruckdriver2020

Ofcourse. You can't beat large moneym they are the ones moving the markets. I think it's simply fear mongering among each other, algos, and people taking profits off the table just in case. NVDA was getting a little pricey so it's just a healthy (but rather dramatic) pullback. I added some during overnight trading. Missed the big rally. I'm ready for the small one. My average target is 868. 988 on a DCF basis only.

Brus83

The problem is, how do you judge what's the fair market value of Tesla so you know it's selling at a discount? Let's say you're using the DCF model - what growth numbers are you using for your assumptions for fair market value? Because, if you do this, you'll come to a realization that Tesla at current stock prices has over 25% year on year growth priced in for the next decade, significantly more than the growth it saw last year or the one before. Buying Tesla on fundamentals would mean you expect that either Tesla will outperform this. You are expecting that Elon will successfully hype something which will launch Tesla's valuation to the moon again. That's possible, but that's not "buying at a discount", that's betting. Which, you know, why not?

Malamonga1

If all you're doing is weigh a stock movement against the market, how are you gonna buy stock at discount? You realize to make money, you have to make a bet against the consensus at some point right? Otherwise, you're just buying what's already priced in, and one step behind actually, because the market looks at news you might not even know about. The only way to buy stock at discount is buying a stock that's been brought down by more pessimism than actually realized, and to do that it's gonna take some balls to buy when people tell you to sell. If you wait until all the bad news are gone, the stock is likely 30-50% off its bottom. And you don't even need to buy at the bottom. Even if you don't, as time goes by, the stock nominal price goes up due to inflation, higher earnings/sales, etc. That's by default when you do DCF valuation. The US recession call moved out of the consensus around summer 2023. By then SP500 was 30% off its bottom.

SyedSan20

Lmao Do you understand how DCF calculations work? The interest rate is in denominator. The higher the denominator, the lower the current value of future cash flow created by companies. One of Fed's job is to not to spook the market, so this release of information by 6 of the 9 Fed Presidents in 1 week was a very strategic move to normalize the heated market a bit. This confirms what we will hear on the 1st.

LoicenseToGirth

That's fair. I'm fairly new to valuations so there's huge room for error. Especially DCF cause it's assuming a growth we don't know for most of the price. I'm at church rn but I'll check comparables later

TonyBerdata27

DCF for a defense / military industrial company seems like it would be verry erroneous, as your assumed growth rate and historical cf can never factor in what geopolitical tensions will arise in the future. I wonder what comps are like for them

humbaobao88

As the title suggests, I'm trying to find the intrinsic value of NVDA and came up with a calculator based on DCF. But I'm having problems trying to figure out what to input for the FCF Growth Rate and Perpetual Growth Rate in order to calculate the Terminal Value (TV). Can any expert provide some guidance on what % you would input for the FCF growth rate and why? Let's base NVDA's current data as a benchmark, forecasting the 10 year FCF. All comments welcome.

LoicenseToGirth

Defense company out of Virginia, unless I'm missing something though their DCF valuation (I could be wrong, obv this is wsb) is saying their stock is worth around 68$/share right now. They just had some news about signing a renewable energy deal with 12 Texas companies, Defense sector in general is rising though due to Israel and Russia wars

realgrumbo

Models like GPT or Claude can’t reliably create DCF models on their own. At the moment, machine learning and deep learning are better at discovering statistical arbitrage strategies. The ability to analyze vast amounts of financial data and identify subtle patterns and inefficiencies can be exploited for profit.

kiwimancy

Do you know what DCF is? >why does the value of a stock go down when earnings report is positive Probably something in the report indicates lower future cashflows, lowering the numerators in DCFs. >why is the performance of the market tied directly to what the Fed Chairman says The FOMC has a major impact on discount rates, changing the denominators in DCF.

Imdoody

Just some educated guesses. I am in no way a professional. and I figured I'd set myself up for embarrassment in this thread. But reaching out to community what they think. But a DCF? no. and DJT's future cash flows? from where? Russia? But do you honestly think that Truth Social, even with it's streaming platform announcement is or will ever be close to valued at $3b? or even )$1b for that matter) when their current assets are around $300 million, with a past year revenue of $4m, and a loss of $50m+. I think I'm being generous at $11-$18

Pharmacologist72

There is this thing called forward PE and DCF….nevermind. Grade A bagholding regard spotted. Good luck.

Mister_Petrs

Why do you think it’s only worth $11-18? Did you do a DCF?

Pharmacologist72

There are things like PE and DCF that sane investors used to look at. Look em up. You might get your answer versus asking bonafide regards and autists here.

Embarrassed-End4105

It’s down 89% from highs not, 50%. I’ve done a whole DCF assuming zero growth in perpetuity and fair value is still >15.

MagnesiumKitten

lol oops... no problem CRM - Salesforce - Software 49PercentOff: Stock Price $299.62 It's $294 right now ......... 49PercentOff: my conservative calc of fair value implies that it's about fairly valued. Modestly overvaled by 19% I think the fair value is $247 ........ So maybe $255 would be about the upper limit for a fair price like it's about 10% too much to get right now... So i wouldn't buy like after Dec 15th, and i'd wait this one out for later... everything else about it seems peachy B rated stock, low risk, passes one Lynch test \[like at the $75 dollar level and the other at the $750 level\] If i was gungho with buying it being overpriced, I would say 60% yes 40% no but i think buying it right nowwould mean it's not going to make me any profits like for a good year and a half in.... .......... 49PercentOff: Fairly Priced between 198 – 324 USD Yes for me it would be about $235-$255 for fair The middle of that range seems not too far off, but why is your range so wide? seems like your method is +-30%, and i'm picking plus/minus 10% ...... 49PercentOff: Cheap below 198 USD For me, cheap is about $235 or lower ......... My guess is your fair value price is very close to one of the DCF calculations Interesting view! When did you pick up CRM? and any thoughts about my more skittish approach to the high price?

JLARGE53

NOPAT = operating income x (1-tax rate). Agree with the other comment, though. No DCF model or any single valuation exercise will tell you much. Too many assumptions in those basic models.

betadonkey

Sure but that’s what I meant. Currently markets are more broadly worried about how interest rates effect the opportunity cost portion of DCF models than they are about how they effect the actual operating performance a business. That’s why even cash flow positive companies with minimal debt sell off at the suggestion of rate hikes. The Fed will not cut if things are not breaking.

justmvh

Lots of reasons. I went back to look at your prior posts to see where your mindset is. You seem on the younger side so you’re coming at this from a different perspective and I use gut instinct based on common sense for much of how I manage my life, including investment purchases. I don’t think I’m all that different than many investors. Go back and read your Under Armour post. The market disagreed with your analysis. You know what you missed? The same thing that Stanley investors are about to miss, which is that the brand is no longer popular with the people that drive that in our society. Don’t knock white girls! You’re better than that! I recently joined this thread and have never built a stock price from the ground up. Admittedly, I’m rusty on DCF. I haven’t done it for decades. But the fundamentals of discounting any asset do not change. It’s the present value of the future income stream. I’m a retired real estate appraiser so I’ve discounted plenty. That rate you’re throwing out there has a huge impact on your valuation. Play around with that number and you’ll see what I mean. Go follow the Starbucks Reddit for a half a cup of coffee and feel the negativity of the barista mindset—I can’t remember a group of more negative and unhappy people. That’s the face of their brand. I’m a fan of Starbucks and have also wondered if the brand is undervalued. But at the end of the day they are selling overly customizable consumables. Their prices have shot way the hell up over the last quarter. I quit buying for awhile when my boomer husband lost his job for six months. There have been times I’ve bought it multiple times a day and others once a quarter or two. It’s fair to say I can afford it more than 99% of their typical buyer. My spending habits are fickle and multiplied over millions of users, so is their income stream. Higher risk, higher discount rate. You are somewhat acting like this is a newer brand with fabulous growth potential. It’s an established 50+ year brand whose best days of growth are in the rear view mirror. They’re fundamentally changing their stores and stripping away their core identity as the third place. They literally are stripping all the furniture out of their stores and building new ones as drive through on souless tiny footprints. The consumer sits silently and happily on their phones, waiting for their fix. It’s a damned near perfect reflection of our post Covid society, but I digress. The combo of price spikes and squeezing human resource and physical plant costs feels the opposite of the growth to which you speak. As others have pointed out, expansion plans have their challenges in the markets described. They are seeking short term revenue growth. Back to the rate. Why did you choose that rate? Why as an investor would I only expect a six percent rate of return if I can put my money into a saving account for 4.5-5% with zero risk? I don’t know what the rate is, but common sense says it ain’t six. Go back in time and study your own analysis on aged stock picks. Where were your assumptions wrong and right? That’s where you’ll learn the most. What I think you’re likely to be missing is common sense indicators and new opportunities from future brand names of companies that exist that you’ve never heard of. Read a lot about everything and then read some more. You’ll start to put puzzle pieces together in ways that others simply miss. I’ve never built a single stock price as you did for this, but I’ve built my retirement account from $150k to $7MM in 21 years as a stay at home mom. And that’s just one of many accounts. I use it as an example because I happen to know some rough numbers for growth and no new funds were added to that investment stream since I quit my full time day job. I’ve never owned a single share of Starbucks, and my husband’s stockbroker, whose gains pale in comparison to mine, has told me that the market is overvalued for twenty years. He finally admitted recently that he and his buddies may have had it wrong all along. There will always be market corrections though. Best of luck and make your own coffee and luck and invest your Starbucks money in your future, not your waistline. I’ll bet that’s not the answer you were expecting! 🙃

Big_Fix9049

I think that ADBE is difficult to predict the future w.r.t. competition and AI. I can and will not bring arguments on that topic. Solely on the fundamental analysis and technical analysis, using DCF, I value ADBE to be fairly priced at around $500, so it's current approx. $480 means it is slightly undervalued. Also, ADBE has just touched its 200MA on a weekly timeframe which often acts as a support line. Also, its RSI shows oversolgt territory. That being said, ADBE might have bottomed here and could go up again in the short term. If I was to add ADBE to my portfolio or was looking to add shares, now is probably where I would comfortably buy a small position.

AnthonysGreat

I listened to everything I could find that Warren Buffett, Charlie Munger, and Peter Lynch had to say. Then it's just about saving every single paycheck and learning on the job. You're bound to make some mistakes or investments you regret but you have to do it to learn and grow. I think the best advice besides buying an ETF is to buy things you don't want to sell. Don't buy things to make money or because you think it'll go up. Buy things you're happy to be an owner of for the long run and hold on to it. Don't compare yourself to anything. Just make the best choices you can every paycheck and the rest will work itself out. If you're afraid to "underperform" then just stick to ETFs. Investing isn't something you can solve with numbers. A lot of people think they can but numbers are just a part and they miss the art of investing. You're buying something today that in a decade or 2 will be worth considerably more because of the quality of the business. It's not a math problem where you plug numbers into a DCF. It's a real business in the real world that you have to study. Not just the numbers they give you on a report.

freakishgnar

Netflix is to the Hollywood studio system what Napster was to the music studios. They're the only profitable streamer because they honed that strategy for years and years. For better or for worse. That said, I've owned NFLX shares for years and while I think they have some growth remaining, I think you could find a better entry point than this. They're about 3% overvalued via DCF. My opinion? Take your profit and keep it on the watchlist. If it corrects or gets to a bargain valuation? Add again.

ok_read702

TSLA and NVDA valuations are high because high future expected returns. You can have amazingly high DCF valuations when you have an expected revenue growth of 300%.

Jeppeje

$CISS - still no announcement of a reverse stock split yet. They are in appeal and have until 8/19. [C3is Inc. Granted 180-Day Extension by Nasdaq to Regain Compliance With Minimum Bid Price Rule (yahoo.com)](https://finance.yahoo.com/news/c3is-inc-granted-180-day-120000673.html) Some DD for those who like more information: **Value Score**: C3is Inc. [has a **Value Score of 100**, which indicates that it is considered **undervalued**](https://www.aaii.com/investingideas/article/198459-6-undervalued-business-support-services-stocks-for-wednesday-march-20)[1](https://www.aaii.com/investingideas/article/198459-6-undervalued-business-support-services-stocks-for-wednesday-march-20). When comparing its **price-to-sales ratio** (P/S) to the industry median, C3is Inc.'s ratio is **0.06**, significantly lower than the industry average of **1.50**. [This suggests that the company’s stock price is relatively lower in relation to its revenue compared to its peers](https://www.aaii.com/investingideas/article/198459-6-undervalued-business-support-services-stocks-for-wednesday-march-20)[1](https://www.aaii.com/investingideas/article/198459-6-undervalued-business-support-services-stocks-for-wednesday-march-20). $WISA - **Intrinsic Valuation**: [WiSA Technologies has an **intrinsic value base case of $6.541** per share, which is significantly higher than the current stock price of **$0.0226**](https://www.alphaspread.com/security/nasdaq/wisa/summary)[1](https://www.alphaspread.com/security/nasdaq/wisa/summary). [The company is currently **undervalued by 99.83%** relative to its estimated fair value based on discounted cash flow (DCF) modeling](https://www.alphaspread.com/security/nasdaq/wisa/summary)[1](https://www.alphaspread.com/security/nasdaq/wisa/summary). **Historical Stock Price**: [The 52-week high for WISA was **$2.68**, indicating a substantial decline from that level](https://www.alphaspread.com/security/nasdaq/wisa/summary)[2](https://finance.yahoo.com/quote/WISA/). The current stock price suggests potential room for growth if the company’s fundamentals improve. **AAII’s A+ Investor Value Grade**: [WiSA Technologies’ value score is derived from a combination of metrics, including **price-to-sales ratio**, **price-earnings ratio**, **enterprise-value-to-EBITDA (EV/EBITDA)**, **shareholder yield**, **price-to-book-value ratio**, and **price-to-free-cash-flow ratio**](https://www.alphaspread.com/security/nasdaq/wisa/summary)[3](https://www.aaii.com/investingideas/article/29725-is-wisa-technologies-inc-wisa-stock-a-good-investment). A higher value score indicates better relative value. **Solvency Score**: [WiSA Technologies’ solvency score is **29/100**, suggesting that the company is relatively solvent](https://www.alphaspread.com/security/nasdaq/wisa/summary)[1](https://www.alphaspread.com/security/nasdaq/wisa/summary). The low debt-to-equity ratio and positive net debt contribute to this score. **Market Cap and EPS Growth**: [The company has a **market capitalization of $1.318 million**](https://finance.yahoo.com/quote/WISA/)[2](https://finance.yahoo.com/quote/WISA/). [Estimated return over a default time horizon of **5 years** is based on projected **EPS growth rate**](https://www.alphaspread.com/security/nasdaq/wisa/summary)[1](https://www.alphaspread.com/security/nasdaq/wisa/summary).

NegativeVega

I mean I still do DCF occasionally to get some idea of comparables and whatnot, but it's by far the least important part of my analysis. I'm not saying he shouldnt, im saying it shouldnt be the main thing he does.

Spare_Bad3430

The forecast is based on what ? Meanwhile i see some DCF analysis show that Nvidia is overvalued. I am confused 😭

datcommentator

The company is optimized for growth, so I don't think PE is the right metric. The forward price to all of 15.72 is still expensive. However, a company with 131% revenue retention, estimated at 25.2% revenue in 5 years' CAGR, will trade at a premium. With a DCF model and a projected 25.2% 5-year CAGR, the stock is more or less fairly priced.

Tendie_Tube

they break when the DCF shows negative value

Wild_Space

I recommend learning how to do a DCF. From a practical standpoint, theyre useless because so much of the value will come from the terminal value. But it's still an important theoretical concept.

itijara

First, learn how to read a 10-k report to the SEC. What each item on a balance sheet and income statement are. Then look into discounted cash flow methods of valuation as well as CAPM (capital asset pricing model). Those are the very basics of fundamental analysis. You should also learn what WACC is (weighted average cost of capital) and how that can be used for discounting. Those are a good foundation to learn other models. Things like PE ratio are based on DCF (discounted cash flow) with assumptions about how earnings are related to growth. Also look up the Fama-French model, which accounts for differences between industries.

Kbarbs4421

I don't think auditors speculate as to the impact of uncertain catalysts. I assume G&I value is tested on a regular basis by either the income approach (DCF) or market comps. Neither will speculate as to the value of a brand, for example, if a federally illegal drug is rescheduled and then regulated in a tbd fashion. I get what you're saying, but when it comes to Tilray I struggle to see how $2.95B in intangibles can be justified, let alone grow in value.

notreallydeep

That's DCF.

HobbitNarcotics

What DCF model did you/they use to get to an intrinsic value of 2.15/share?

redbear5000

dismissing the company's potential based solely on valuation metrics overlooks important things. NVDA operates in an evolving industry where traditional valuation methods does not fully capture future growth. The demand for their services continues to rise. Their recent performance indicates strong momentum. focusing solely on P/E ratios and DCF models neglects aspects of NVDA's business, such as technological innovation . While past growth rates may not be sustainable indefinitely, NVDA's record of adapting to market trends and expanding its product offerings serves its long-term purpose. Just look at Tesla, Amazon, META

SkinnyPets

Dear god no. It was bid up to insanity. Beyond priced to perfection. “If” you look at it fundamentally, DCF, P/E etc etc. they would need to grow at no less than 20% per year for 15 years straight for the current price to justify the “future” profits… at a P/E of 70… fine if they grow at 70 percent. I am aware they’ve recently done more than that this year (No company can grow at that rate year over year over year) they all slow down… and I don’t see a long line of people handing them 10 million dollars per order per year… if I had some NVDA I’d be looking to do some selling for profit taking… if you don’t follow fundamental analysis then I’m sure most of this is falling on deaf ears. Do whatever you want. I hope it works out for you. Buy high to sell higher is not something I do. Chase that hot hand I hope they grow up to be a $94 trillion dollar company. Hope it works out for you.. history doesn’t exactly repeat, but it rhymes .

AP9384629344432

My suggestion is to not rely on such a website. Let me explain why: - If the price targets are based on analysts, then the issue is those are lagging indicators. They move them up when the price goes up, and move them down when the price falls. Moreover, they tend to act in unison. Now I'm not totally against analyst price targets--but I'm more interested in their estimates of earnings and averaged across multiple analysts. (Which is how we compute forward P/E multiples) That's at least more 'objective' hopefully, while for the actual price target who knows what multiple they are using (EV/EBITDA, EV/FCF, P/FCF, P/EBIT, P/E, P/(2025 E), ...) - If they aren't based on analyst price targets, it means most likely the website is plugging in the company's financials into a generic discounted cash flow model. And these are usually awful. Why? They make questionable assumptions like 'Assume the past few years of revenue growth are exactly like the next few' or 'assume revenue growth reverts to this number we picked'. Now those may be fine assumptions, but when you are writing generic code to handle hundreds/thousands of companies, you end up with terrible models that fail to account for industry trends, regulatory/legal issues, management quality, accounting oddities, etc. An easy tell is when they tell you a company is 150% undervalued and it turns out to be because it's a highly cyclical, leveraged steel company with a suppressed P/E ratio that it deserves but the DCF model uses the same procedure as it does for modelling Apple (which it states is 50% overvalued). Instead, you should do your own research, borrowing analyst estimates of revenue/earnings as a tool but not as gospel, and for sure not relying on some price target pulled out of thin air. Build you own DCF models or if that's too complicated, figure out reasonable multiples to apply given the growth and where its peers trade out. If you are unwilling to do that work, then I think investing in individual stocks is a poor idea.

animositisomina35

BERNSTEIN: TSLA stock “remains high on almost every valuation metric compared to both traditional and higher-growth auto OEMs .. Our DCF now points to fair value of $93 (down from $120), primarily due to lowered estimates .. but also due to a push-out in EV adoption growth.”

LivingDracula

Bolinger Bands are math. It's a moving average and standard deviation 😅 The problem is you don't even know what you don't know and you don't care to do the research or basic googling things up before commenting. You just trash talk someone with good intentions and sound ignorant. You confuse TA with chart patterns and call everything you dont understand and dont look up as "astrology." I honestly could have talked about DCF, residual income models, ARIMA, or HMMs and you'd still think that was astrology. Talk about intellectual dishonesty...

According_Owl7944

Ok big shot, lol. Gatekeeping? I'm gatekeeping by sending you information? Oh, and information you should already know since you're so familiar with the finance industry lol. Gatekeeping, really? That is some serious gen z crybaby stuff. Cry me a river. If you're such an expert why didn't you know how interest rates affect DCF in financial models? Why don't you just google this information? Sure, you're just posting a question or idea. But your question is essentially saying "Hey I think the entire stock market is wrong, and I'm right." [https://www.nasdaq.com/articles/how-do-rising-interest-rates-affect-the-stock-market](https://www.nasdaq.com/articles/how-do-rising-interest-rates-affect-the-stock-market) *Rising rates affect equities in three primary ways.*  *First and foremost, higher debt costs squeeze corporate profits. "Firms with a lot of debt are impacted by potential higher interest expense," says Bruce Liegel, former fund manager at Millennium and author of* [*Global Macro Playbook*](https://www.hedder.com/series/global-macro-playbook)*, a monthly research series. “Small cap companies also underperform large cap companies, as they are typically more vulnerable to higher borrowing costs.” Consequently, such falling corporate profits will drag on stock prices.*  ***Moreover, rising rates dim the economic growth prospects and can impact future returns for companies.***  ***Secondly, rising rates decrease the present value of any business.***  ***As already outlined, interest rates are the discount rate on future cash flows. So, a higher discount rate lowers the present value of future earnings for stocks.***  *When this occurs, stock prices tend to face downward pressure. To quote the Oracle of Omaha again, “the most important item over time in valuation is obviously interest rates. If interest rates are nothing, values can be almost infinite. If interest rates are extremely high, that's a huge gravitational pull on values”.*

bohdan-v

My DCF fair price is $171 so far.

bohdan-v

GOOGL is still a great stock to go in. Forward P/E 19.99 vs 5-Yr AVG 26.19 PEG 1.18 vs 5-Yr AVG 1.32 DCF Fair price: $171 [https://stockone.page/stock/GOOGL](https://stockone.page/stock/GOOGL)

Prestigious_Meet820

Try a reverse DCF and see how high the bar is set. A lot of high profile stocks like this in the market now.

Outrageous-Cycle-841

Or just build the expected dilution into the DCF model… not rocket science.

jfk_sfa

>I am not a math or valuation wizard but I know they use discounted value of future earnings or future cash flows or something. And they forward a few years to calculate that. Valuation professional here (CFA, MBA, business valuation for 18 years...). You would do a DCF of free cash flow to equity, not a DCF of the market cap divided by the active users. So, what's the annual FCF of reddit? Well, it was negative $100 million in 2022 and negative $84 million in 2023. https://www.sec.gov/Archives/edgar/data/1713445/000162828024006294/reddits-1q423.htm

bliming1

So you're technically correct about how analysts calculate DCF valuations. However, OP isn't talking about discounted cash flows. They are talking about the current market cap which can absolutely be unrealistic. This is the entire concept behind value investing. I would not trust that $8bil valuation to be anchored by any sort of legitimate DCF valuation during the IPO hype phase.

Ashamed_Photograph84

DCF or compare its EBITDA multiple with similar companies.

equabyte

DCF Calc [https://play.google.com/store/apps/details?id=com.equabyte.DCF\_Calc\_V1](https://play.google.com/store/apps/details?id=com.equabyte.DCF_Calc_V1)

Slaxle

It's an interesting stock. PayPal has been increasing netsales for many years in a row. Book value up as well. Netdept is - 5%. The price is down. Prognosis based on DCF (given current growth rate compared to 10 % interest) are a value around 107 USD right now. But the stock doesn't seem to be performing up to those standards based on the poor vision, declining user base, rising competition and lack of a clear MOAT

MasterofPenguin

Haha. I also just confirmed 100 shares, just enough to write a covered option contract if I wanted to. Assuming at max price $34 the IPO is over-subscribed My 5-year DCF came to $38.54 as an implied value, but I also wasn’t gonna lever up on student loans to do make a play. If they start crushing the data selling business maybe it’ll be the down payment on a house in a few years.

justoneword_plastics

The program is called Canalyst by Tegus. They keep up to date models of analyst projections for the top 2 or 3k companies and you can drop in valuation templates and play with the assumptions. Without doxxing myself, I am a member of a program where this service is provided to me. With a quick Google, it looks like it costs 10k per year, sorry man. I will say though, you could prob sketch out the columns here on excel and then drop in income statements from yahoo finance Without too much work for free. More manual of course but lmk if you have questions about the DCF build out

Suitable_Inside_7878

Glad you’re interested too! My favorite books on audible may sound cliche, but they really opened my mind and provided a good logical foundation. Essays of Warren Buffet by Lawrence Cunningham A Random Walk down Wallstreet 12th edition by Burton Malkiel The little book of common sense investing by John/Jack Bogle (founder of Vanguard) Bond investing for dummies by Russell Wild Exchange traded funds for dummies 3rd edition by Russell Wild The intelligent investor by Benjamin Graham The spreadsheets I made myself which I pull information from yahoo finance statistics, cash flow, income statements, and balance sheets. I use a DCF equation for the first 5 years of estimate growth for a company then add a Terminal value for the perpetuity of the stock after 5 years discounted at 20% and assuming no growth to get a conservative estimate of a price. I look at how the company is financed, how much they pay in debt, their financing cash flow (how much they give back to investors), and put all the data in terms of per dollar invested, instead of $/share because different companies have different amounts of shares and prices, so you have to compare like units, so I use $/dollar invested. The SEC site EDGAR is all I really use as it is the most reliable and the information vetted by the federal government. I don’t listen to any analysts, but I subscribe to the investor relations site for a company I invest in to keep an eye on what’s happening. I’ll sometimes listen to conference calls for a stock on the Quartr app, but they can be boring and often contain little valuable information.

RungeKutta62

Very interesting! What are the good audiobooks that you listened to? What are DCF Spreadsheets? Do you only use SEC documents to get information on stocks? Or do you have other sources such as YouTube?

Suitable_Inside_7878

I listen to audiobooks on investing all day at work… some people would find that boring but I’m obsessed lol I also make intense DCF spreadsheets in excel and read lots of SEC documents (8Ks and 10Ks). I also don’t listen to anyone else, I just determine a price I would pay for a share of stock and see if the market is offering something lower, and when it gets higher I sell. If new information comes to light I am willing to change my previous judgement. For example, I bought PFE last October and sold it for a small loss once I got information that changed my buy price down to $21/share.

80sCocktail

Don't forget to do your DCF valuations as you consider which stocks you pick. 

TheFlyingBoat

Ended up quickly skimming it for about 2 minutes starting at your suggested point since I figured it was just a basic DCF. It's medium growth case is about what I expect and aligns well with my predictions it will grow pretty quickly to be a ~1200 dollar stock and honestly I think there's a lot of room for the high case to be achieved and potentially beyond that given how much demand I think there will be for AI, especially once state level actors begin procurement in mass for defense, civilian agency work, and for university research in addition to the large corporations that already have large backorders.

iLuvRachetPussy

I think you’re missing the part where the value of a stock isn’t based on staying power but it’s DCF. Aeronautics+Bad Quality= less contracts You decide what that does for future revenues and profits and then extrapolate from there what this means for the valuation of the company.

Maleficent_Major_337

Oh sorry man I misunderstood the question. No I’ve never seen a company have a high PS compared to forward PE but I’d usually stay away if the PS is trading way above its net income multiple. Sounds to me like the stock is getting a hype around it that people are pricing in a massive premium relative to its earnings. If this was a real company I’d look at their actual cash from operations, FCF and DCF the price to see if it’s overvalued. Otherwise I’d stay away. The market for some reason is overly bullish on the stock. For example amazon was trading with a PE of 60 with a PS of 15. That’s already a high multiple but if the PS is as high as the forward PE I would be sceptical of their prospects for growth and I would call it detached from the fundamentals. Please correct me if I got the jist of your question wrong

KnowledgeNate

Option value on what they have. Willing to make a bet on pre-monetization because I think $6.5B is nearly a floor price for this. 20% annual compounding user growth, new uses of mines of data, and there's plenty of $5B companies you've never heard of, while reddit is only becoming more and more well-known. I think demand for the stock (5x oversubscribed), and option value on its data property is more indicative of value than a DCF valuation (if that is what you're driving at) that I believe is an archaic philosophy in today's market. Play is to sell on IPO pop on Day 1, targeting 100% returns, will then buy back entire position on Day 2, doubling my share-count to 2,000. Thereafter, I'll wait for an options market to develop and will grab OTM leaps at $50 strike.

1337-5K337-M46R1773

I do not totally agree. I have done zero math on the companies in my portfolio and they have all done quite well. Granted >70% of my portfolio is actually SPY, but I think you can come up with valid theses (or a worldview) that can drive solid returns without doing a DCF or any actually valuation. 

lemonadosaur

Let’s see how it shakes out dude. You have no idea on the numbers and are investing with your feelings. I sold at 500 (~70x return) because I thought people wouldn’t be any more unreasonable than they were at that time. I might not be good at timing stupidity but I know an overvalued company if I see one. If you are so confident then give the highlights of a DCF which justifies this valuation. Otherwise keep pumping with your cope. If you don’t understand the tech, the numbers , or the market then you shouldn’t be investing or giving any advice. Let’s revisit this chat in a while as see. You might have a different username by then.

MasterofPenguin

I did a DCF, projecting out revenue based on user growth (YOY by quarter) and ARPU growth, and did a deep dive on their owed stock based compensation + deferred taxes and got to a valuation of $31.7 in a slightly down case, $34.5 in a middle case and near $40 in an big up case. Besides user growth and average revenue per user, data licensing will likely grow, and they’re sitting on $1.3B in cash and another Billion in networking capital, which I’m not sure why that’s the case. Besides being used for runway they’re averaging 4% returns on the cash, so I assume they have it stuck in a T-Bond ladder. I’m throwing a few grand in but I’m not betting the farm either. Might write covered put options to all these Yolos willing to pay me premiums for it.

ThinkingOfTheOldDays

the issue is quite a bit of the small caps are either unprofitable, or finance operations from debt. in a rising interest rate environment, this greatly spooks investors on both of those concerns. DCF's discount future earnings harder (lower stock prices), and future earnings can be expected to lower because of increased interest expense as these debt laden firms roll over debt at higher interest rates. there's also the issue that alot of small cap constitutents are small banks, which are facing commercial real estate issues & falling capital reserves due to reduced prices for treasury bonds. a lot to hate, but if there is any change in expectations about fed cutting rates, the sector will rocket. something to keep an eye on, and average down as interest rate expectations rise (such as this week, yesterday)

FFnFinanceAcct

It means various present and expected future outcomes are inputs into a DCF or related financial model that outputs the present value of a company / share. 

Hanzoisbad

Hey man, not disagreeing that there are other points of comparison that could be done against TSLA with way more competitors but I was trying to keep my research compact. I believe that everyone will get a pie of the EV market, the difference is who gets the most. I genuinely do believe that a long laundry list of points of comparison would not really add much value because this is a DCF rather than a “list of reasons to buy one EV brand over the other”, so for simplicity I looked at existing customers and what is the rate they are likely to convert to another brand and TSLA is the lowest, https://customergauge.com/benchmarks/blog/tesla-nps-score#:~:text=A%20recent%20study%20from%20Experian,car%20bought%20a%20new%20one.

AP9384629344432

Someone asked where I got 25 as an exit multiple, and I wrote a response but then they deleted, so here is my explanation: > Just a random number mostly, seemed like a reasonable choice for a company that is growing at triple digits, taking market share away from Monster, increasing margins. Damodaran in his spreadsheets provides median EV/EBITDA or EV/EBIT multiples for every industry. For soft beverages, the average is about 18 and 21, respectively, so I gave them a bit of a premium due to their success so far. [Here is the DCF using 18 as an exit multiple on final year EBIT](https://i.imgur.com/fdQlNNC.png). Intrinsic value goes from $150 to $112. > > For what it is worth, Damodaran's spreadsheet (screenshot #3 in post) does not use any kind of exit multiple. That was only for my rough DCF.

AP9384629344432

I wrote this 12 days ago ([link](https://www.reddit.com/r/stocks/comments/1b2x8gt/rstocks_daily_discussion_options_trading_thursday/ksrcxbl/)): This is not financial advice / DYOR, but here's my quick take on CELH. I have shares at $54 and it's 1% of my portfolio. I'm going to be less conservative now with my assumptions thanks to this good report. - This report reaffirmed my confidence in near triple digits revenue growth near term and high double digits this decade. - The rise in gross/operating margins was a welcome surprise. 20% operating margins for this past year, and to be conservative assuming it stays at 18% indefinitely. - Expecting analysts to start significantly revising up their growth expectations going forward. Forward P/E should come down. - I now have more confidence projecting strong growth ahead. In my simple DCF model, I'm going to assume 80% growth in 2024, 60% in 2025-6, and 50% in 2027-2028, then an exit multiple of 25. Discount rate 15%. My new intrinsic value is closer to $150 (83% higher). [Screenshot](https://i.imgur.com/iDRQvno.png). - If you made me use a conservative model, say 60% growth in 2024 then 40% growth through 2028, then exit multiple of 25 implies fair value $91 (12% higher). [Screenshot](https://i.imgur.com/oql3WI9.png) - Using Damodaran's spreadsheet I mentioned yesterday, where I used 80% growth in 2024, 19% operating margins indefinitely, then 50% growth years 2-5, then 4% growth in perpetuity (risk-free rate), sales/capital ratio of 2 falling to 1.76 (slightly higher than industry median). Get fair value of $130. [Note this method doesn't use any kind of relative multiple.] [Screenshot of results in his 'summary' tab](https://i.imgur.com/AYQkkfu.png) The sales/capital ratio I used is consistent with a 28% ROIC in 10 years. (Thoughts on if that is reasonable? I was most uncertain on that ratio) My conclusion: Company is certainly fairly valued today, and in the best case 100% undervalued. I don't know if I'll be buying today besides occasional DCAing, but if the company falls back to $50s-60s I may significantly increase my position.