Good Morning Fellas! I am trying to Learn Fundamentals. I love the stocks!
Yesterday I posted a raw estimate of Microsoft's fair value, it is pretty ugly, so ignore it lol
Disclaimer: I do not consider other factors like management, investments, partnerships, contracts, macro-economics and many, many other more variables, this is just an exercise i made to practice Fundamental Analysis. Obviously, if we take in count other factors, Free Cash Flow and Stock Price will change. And the following is is not Financial Advice.
Thanks to everyone that intervened yesterday in the discussion! Today I adjusted some data and re-calculated it. Following, you can see where I took my numbers:
| Data | Numbers | Description |
|---|---|---|
| Beta | 0.94 | 5 Years Monthly |
| Risk Free Rate | 3.773% | 10 Years US Treasury Yield |
| Historical Market Return | 9.89% | 30 years average stock market return |
| Interest Expense | 2,063,000 | in thousands |
| Short Term Debt | 2,749,000 | in thousands |
| Long Term Debt | 47,032,000 | in thousands |
| Income Tax Expense | 10,978,000 | Tax Provisions in thousands |
| Income before tax | 83,716,000 | Pretax Income in Thousands |
| Market Cap | 1.80 T | trillions |
| Free Cash Flow growth estimate | 20.08% | Estimate from average growth rate of past 3 years free cash flow |
| Analysts Growth Rate | 14.96% | Average Growth Rate Analysts Consensus |
| Average GDP growth rate | 2.5% | Average Growth rate consensus 2.5 to 3.5% |
| Cash and Market Securities | 104,749,000 | Cash & Cash Equivalents in thousands |
| Debt | 61,270,000 | Total Debt in thousands |
| Share Outstanding | 7.46 B | 7,460,000 thousands |
| WACC | 9.34% | Weighted Average Cost of Capital |
| CAPM | 9.5% | Capital Asset Pricing Model |
| Discount Rate used | 9.42% | Average Between WACC and CAPM |
I took in consideration analysts growth rate estimate, we will calculate the Fair Value with both, the analysts one (14.96%) and the estimate of mine (20.08%). Following, estimate of Per Share Price with analysts growth rate estimate:
| Terminal Value | 1,999,137,658.02 |
|---|---|
| Enterprise Value | 1,653,249,214.62 |
| Share Fair Value | 226.57$ |
And down here the estimate using my growth rate:
| Terminal Value | 2,485,777,888.99 |
|---|---|
| Enterprise Value | 2,019,071,891.46 |
| Share Fair Value | 275.61$ |
We can clearly see that with analysts one, it is a SELL, but with mine it is a BUY.
I would like to share the Free Cash Flow Projections too but sub wont allow me to post pics :/
Conclusions:
From this quick analysis we can see that the Stock's Fair Value is between 226$ and 275$, those data indicate that it is a good buy opportunity and smart to DCA between that range if we are intended to stay invested for the long run.
What do you think? What are your thoughts? Do you have any other advices or indications? I am learning, i know that in this sub there are smart people too, so don't complain that this is not the right sub lol
I like to learn form you too!
Submitted October 06, 2022 at 06:33AM by YungChaky https://ift.tt/vXWikDe
