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Yahoo
a day ago
- Business
- Yahoo
A Look At The Fair Value Of Straumann Holding AG (VTX:STMN)
Using the 2 Stage Free Cash Flow to Equity, Straumann Holding fair value estimate is CHF87.37 Straumann Holding's CHF105 share price indicates it is trading at similar levels as its fair value estimate The CHF126 analyst price target for STMN is 44% more than our estimate of fair value Today we will run through one way of estimating the intrinsic value of Straumann Holding AG (VTX:STMN) by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (CHF, Millions) CHF478.9m CHF540.7m CHF598.3m CHF534.4m CHF592.6m CHF600.1m CHF606.1m CHF611.1m CHF615.5m CHF619.3m Growth Rate Estimate Source Analyst x8 Analyst x9 Analyst x7 Analyst x1 Analyst x1 Est @ 1.26% Est @ 1.01% Est @ 0.83% Est @ 0.71% Est @ 0.62% Present Value (CHF, Millions) Discounted @ 4.6% CHF458 CHF494 CHF522 CHF446 CHF473 CHF457 CHF442 CHF426 CHF410 CHF394 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CHF4.5b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (0.4%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 4.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = CHF619m× (1 + 0.4%) ÷ (4.6%– 0.4%) = CHF15b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CHF15b÷ ( 1 + 4.6%)10= CHF9.4b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is CHF14b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of CHF105, the company appears around fair value at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Straumann Holding as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 4.6%, which is based on a levered beta of 0.971. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for Straumann Holding Strength Debt is not viewed as a risk. Weakness Earnings growth over the past year underperformed the Medical Equipment industry. Dividend is low compared to the top 25% of dividend payers in the Medical Equipment market. Opportunity Annual earnings are forecast to grow faster than the Swiss market. Good value based on P/E ratio compared to estimated Fair P/E ratio. Threat Revenue is forecast to grow slower than 20% per year. Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Straumann Holding, we've put together three fundamental factors you should consider: Financial Health: Does STMN have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does STMN's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SWX every day. If you want to find the calculation for other stocks just search here. — Investing narratives with Fair Values A case for TSXV:USA to reach USD $5.00 - $9.00 (CAD $7.30–$12.29) by 2029. By Agricola – Community Contributor Fair Value Estimated: CA$12.29 · 0.9% Overvalued DLocal's Future Growth Fueled by 35% Revenue and Profit Margin Boosts By WynnLevi – Community Contributor Fair Value Estimated: $195.39 · 0.9% Overvalued Historically Cheap, but the Margin of Safety Is Still Thin By Mandelman – Community Contributor Fair Value Estimated: SEK232.58 · 0.1% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. 擷取數據時發生錯誤 登入存取你的投資組合 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤
Yahoo
4 days ago
- Business
- Yahoo
Estimating The Intrinsic Value Of Grafton Group plc (LON:GFTU)
Using the 2 Stage Free Cash Flow to Equity, Grafton Group fair value estimate is UK£11.45 Current share price of UK£9.95 suggests Grafton Group is potentially trading close to its fair value Analyst price target for GFTU is UK£11.89, which is 3.9% above our fair value estimate In this article we are going to estimate the intrinsic value of Grafton Group plc (LON:GFTU) by taking the expected future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. There's really not all that much to it, even though it might appear quite complex. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£122.0m UK£147.4m UK£167.8m UK£164.9m UK£164.2m UK£164.9m UK£166.7m UK£169.3m UK£172.4m UK£175.9m Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x4 Est @ -1.70% Est @ -0.43% Est @ 0.46% Est @ 1.08% Est @ 1.52% Est @ 1.83% Est @ 2.04% Present Value (£, Millions) Discounted @ 8.9% UK£112 UK£124 UK£130 UK£117 UK£107 UK£98.8 UK£91.7 UK£85.5 UK£79.9 UK£74.9 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = UK£1.0b We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.5%. We discount the terminal cash flows to today's value at a cost of equity of 8.9%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£176m× (1 + 2.5%) ÷ (8.9%– 2.5%) = UK£2.8b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£2.8b÷ ( 1 + 8.9%)10= UK£1.2b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£2.2b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of UK£9.9, the company appears about fair value at a 13% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Grafton Group as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.9%, which is based on a levered beta of 1.242. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Grafton Group Strength Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Trade Distributors market. Opportunity Annual revenue is forecast to grow faster than the British market. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the British market. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Grafton Group, there are three important elements you should consider: Financial Health: Does GFTU have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for GFTU's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every British stock every day, so if you want to find the intrinsic value of any other stock just search here. — Investing narratives with Fair Values A case for TSXV:USA to reach USD $5.00 - $9.00 (CAD $7.30–$12.29) by 2029. By Agricola – Community Contributor Fair Value Estimated: CA$12.29 · 0.9% Overvalued DLocal's Future Growth Fueled by 35% Revenue and Profit Margin Boosts By WynnLevi – Community Contributor Fair Value Estimated: $195.39 · 0.9% Overvalued Historically Cheap, but the Margin of Safety Is Still Thin By Mandelman – Community Contributor Fair Value Estimated: SEK232.58 · 0.2% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-06-2025
- Business
- Yahoo
A Look At The Intrinsic Value Of Spectral AI, Inc. (NASDAQ:MDAI)
Using the 2 Stage Free Cash Flow to Equity, Spectral AI fair value estimate is US$2.30 Current share price of US$2.19 suggests Spectral AI is potentially trading close to its fair value Our fair value estimate is 52% lower than Spectral AI's analyst price target of US$4.79 Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Spectral AI, Inc. (NASDAQ:MDAI) as an investment opportunity by estimating the company's future cash flows and discounting them to their present value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) -US$8.90m -US$1.80m US$3.70m US$2.90m US$3.30m US$3.60m US$3.87m US$4.10m US$4.31m US$4.50m Growth Rate Estimate Source Analyst x1 Analyst x1 Analyst x1 Analyst x1 Analyst x1 Est @ 9.20% Est @ 7.32% Est @ 6.01% Est @ 5.09% Est @ 4.44% Present Value ($, Millions) Discounted @ 7.4% -US$8.3 -US$1.6 US$3.0 US$2.2 US$2.3 US$2.3 US$2.3 US$2.3 US$2.3 US$2.2 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$9.1m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$4.5m× (1 + 2.9%) ÷ (7.4%– 2.9%) = US$103m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$103m÷ ( 1 + 7.4%)10= US$50m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$59m. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$2.2, the company appears about fair value at a 4.9% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Spectral AI as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.4%, which is based on a levered beta of 1.040. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. View our latest analysis for Spectral AI Strength Debt is well covered by earnings. Weakness Shareholders have been diluted in the past year. Opportunity Forecast to reduce losses next year. Current share price is below our estimate of fair value. Threat Debt is not well covered by operating cash flow. Has less than 3 years of cash runway based on current free cash flow. Total liabilities exceed total assets, which raises the risk of financial distress. Not expected to become profitable over the next 3 years. Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Spectral AI, we've put together three essential factors you should further research: Risks: Take risks, for example - Spectral AI has 4 warning signs (and 2 which make us uncomfortable) we think you should know about. Future Earnings: How does MDAI's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQCM every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
22-06-2025
- Business
- Yahoo
Farm Fresh Berhad (KLSE:FFB) Shares Could Be 22% Below Their Intrinsic Value Estimate
Using the 2 Stage Free Cash Flow to Equity, Farm Fresh Berhad fair value estimate is RM2.35 Current share price of RM1.84 suggests Farm Fresh Berhad is potentially 22% undervalued Our fair value estimate is 15% higher than Farm Fresh Berhad's analyst price target of RM2.04 Does the June share price for Farm Fresh Berhad (KLSE:FFB) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (MYR, Millions) RM41.4m RM48.5m RM95.3m RM144.6m RM184.3m RM221.8m RM255.8m RM286.1m RM312.8m RM336.8m Growth Rate Estimate Source Analyst x4 Analyst x2 Analyst x4 Analyst x2 Est @ 27.49% Est @ 20.33% Est @ 15.32% Est @ 11.82% Est @ 9.37% Est @ 7.65% Present Value (MYR, Millions) Discounted @ 8.4% RM38.2 RM41.2 RM74.9 RM105 RM123 RM137 RM146 RM150 RM152 RM151 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM1.1b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM337m× (1 + 3.6%) ÷ (8.4%– 3.6%) = RM7.4b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM7.4b÷ ( 1 + 8.4%)10= RM3.3b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is RM4.4b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of RM1.8, the company appears a touch undervalued at a 22% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Farm Fresh Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.4%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for Farm Fresh Berhad Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Weakness Dividend is low compared to the top 25% of dividend payers in the Food market. Opportunity Annual earnings are forecast to grow faster than the Malaysian market. Trading below our estimate of fair value by more than 20%. Threat Revenue is forecast to grow slower than 20% per year. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Why is the intrinsic value higher than the current share price? For Farm Fresh Berhad, there are three fundamental aspects you should consider: Financial Health: Does FFB have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk. Future Earnings: How does FFB's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the KLSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
21-06-2025
- Business
- Yahoo
A Look At The Intrinsic Value Of MYR Group Inc. (NASDAQ:MYRG)
Using the 2 Stage Free Cash Flow to Equity, MYR Group fair value estimate is US$162 With US$169 share price, MYR Group appears to be trading close to its estimated fair value The US$171 analyst price target for MYRG is 5.7% more than our estimate of fair value Does the June share price for MYR Group Inc. (NASDAQ:MYRG) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back to today's value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$80.6m US$96.3m US$108.2m US$118.4m US$127.4m US$135.2m US$142.2m US$148.7m US$154.7m US$160.4m Growth Rate Estimate Source Analyst x1 Analyst x1 Est @ 12.32% Est @ 9.51% Est @ 7.54% Est @ 6.16% Est @ 5.19% Est @ 4.52% Est @ 4.04% Est @ 3.71% Present Value ($, Millions) Discounted @ 7.6% US$74.9 US$83.1 US$86.7 US$88.2 US$88.1 US$86.9 US$84.9 US$82.4 US$79.7 US$76.8 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$832m After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 7.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$160m× (1 + 2.9%) ÷ (7.6%– 2.9%) = US$3.5b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$3.5b÷ ( 1 + 7.6%)10= US$1.7b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$2.5b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$169, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at MYR Group as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.6%, which is based on a levered beta of 1.087. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for MYR Group Strength Debt is not viewed as a risk. Weakness Earnings declined over the past year. Expensive based on P/E ratio and estimated fair value. Opportunity Annual earnings are forecast to grow faster than the American market. Threat Annual revenue is forecast to grow slower than the American market. Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For MYR Group, we've put together three pertinent elements you should look at: Risks: We feel that you should assess the 1 warning sign for MYR Group we've flagged before making an investment in the company. Future Earnings: How does MYRG's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
