Yahoo! Inc. (YHOO)
Discount cash flow analysis
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $17.75 | $17.54 | $17.33 | |
| Terminal Growth% | 0 | $17.84 | $17.62 | $17.41 |
| +1% | $17.92 | $17.70 | $17.48 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $7.21 (overvalued by 53.24%) - 6 hours ago
- SethWellbourne created a new valuation of $8.91 (overvalued by 49.14%) - over 2 years ago
- Diegoengel created a new valuation of $8.86 (overvalued by 41.63%) - over 2 years ago
- GordonGekko created a new valuation of $14.49 (overvalued by 14.21%) - over 2 years ago
- jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - over 2 years ago
- jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - over 2 years ago
- GordonGekko created a new valuation of $14.92 (undervalued by 5.52%) - over 3 years ago
- SethWellbourne created a new valuation of $7.21 (overvalued by 47.22%) - over 3 years ago
- SethWellbourne created a new valuation of $10.46 (overvalued by 17.64%) - over 3 years ago
- turbocarlos created a new valuation of $15.37 (undervalued by 28.4%) - over 3 years ago
- GordonGekko created a new valuation of $11.35 (undervalued by 7.28%) - over 3 years ago
- TheCrunchBlog created a new valuation of $17.62 (undervalued by 36.59%) - over 3 years ago
- GordonGekko created a new valuation of $15.43 (undervalued by 21.98%) - over 3 years ago
- GordonGekko created a new valuation of $14.80 (overvalued by 3.33%) - over 3 years ago
- TheCrunchBlog created a new valuation of $20.07 (overvalued by 27.6%) - over 4 years ago
- TheCrunchBlog created a new valuation of $23.44 (overvalued by 13.19%) - over 4 years ago
- TheCrunchBlog created a new valuation of $17.91 (overvalued by 33.67%) - over 4 years ago
- GordonGekko created a new valuation of $20.07 (overvalued by 25.67%) - over 4 years ago
- GordonGekko created a new valuation of $22.19 (undervalued by 2.4%) - over 4 years ago
- KiwiEMH created a new valuation of $19.84 (overvalued by 7.29%) - over 4 years ago
- GordonGekko created a new valuation of $21.80 (overvalued by 18.66%) - over 4 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 20,117 |
| Net Debt (Long-term borrowings less cash): | -1,251 |
| Equity Value: | 17,876 |
| Number of Shares Outstanding: | 1,385,000,000 |
| Calculated value per share: | $17.62 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-yahoo-yhoo-trading-below-intrinsic-value/
Assumptions
Revenue: Reuters aggregates 25 analysts covering $YHOO and these analysts have mean estimates of 2008 and 2009 revenues of US$5.69 and US$6.42 billion respectively. For our analysis we have used US$5.50 billion in 2008, US$6.15 billion in 2009 and US$6.75 billion in 2010.
Profitability: We have used an EBITDA margin of 33% flat to 2010.
Capital Expenditure: We have assumed capital expenditures of US$700 million in 2008, US$800 million in 2009 and 2010 and then US$750 million beyond that.
Discount Rate: 11.0%.
Terminal Growth Rate: 4.5%.
Our analysis incorporates the cash the $YHOO balance sheet – Valuecruncher calculates a net debt number.