Friday, October 7, 2011

Intel Corp: $INTC cash flow valuation update


Current Price: ~ $22/share
Projected Yield: ~ 3.81%


Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.

I estimated the firm's WACC today at 10.32% using the Capital Asset Pricing Model and the company's recent SEC filings.


Recent free cash flows and growth rates:

Year
FCF $Millions
2001
1345
2002
4426
2003
7859
2004
9276
2005
9005
2006
4841
2007
7625
2008
5729
2009
6655
2010
11485
TTM
8673

Average Annual Growth FCF: ~ 44%
CAGR FCF: ~ 27%
Consensus Forecast Industry 5-Year Growth: ~ 16% per year
Consensus Forecast Company 5-Year Growth: ~ 11% per year

Starting at $8673 million FCF, assuming the company achieves a 5-year growth rate in FCF of 11% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
8673
1
9627
2
10686
3
11861
4
13166
5
14615
Terminal Value
157130
The firm's future cash flows, discounted at a WACC of 10.32%, give a present value for the entire firm (Debt + Equity) of $140,310 million. If the firm's fair value of debt is estimated at $7400 million, then the fair value of the firm's equity could be $132,910 million.  $132,910 million / 5250 million outstanding shares is approximately $25 per share and a 20% margin of safety is $20/share.

Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate anypositions within the next 72 hours.

Thursday, October 6, 2011

Microsoft Corporation: $MSFT cash flow valuation update


Current Price: ~ $26/share
Projected Yield: ~ 3.09%


Microsoft develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. The Windows PC and Office franchises collectively account for nearly 60% of the firm's revenue, and the server and tools business contributes 24%. The firm's other businesses include the Xbox 360 video game console, Bing Internet search, business software, and software for mobile devices.

I estimated the firm's WACC today at 10.69% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:

Year
FCF $Millions
2002
13739
2003
14906
2004
13517
2005
15793
2006
12826
2007
15532
2008
18430
2009
15918
2010
22096
2011
24639


Average Annual Growth FCF: ~ 8%
CAGR FCF: ~ 7%
Consensus Forecast Industry 5-Year Growth: ~ 20% per year
Consensus Forecast Company 5-Year Growth: ~ 10% per year

Average FCF over the past 3 years is $20,884 million.  Starting at $20,884 million FCF, assuming the company achieves a 5-year growth rate in FCF of 10% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
20884
1
22972
2
25270
3
27797
4
30576
5
33634
Terminal Value
346106


The firm's future cash flows, discounted at a WACC of 10.69%, give a present value for the entire firm (Debt + Equity) of $310,778 million. If the firm's fair value of debt is estimated at $12,100 million, then the fair value of the firm's equity could be $298,678 million.  $298,678 million / 8380 million outstanding shares is approximately $36 per share and a 20% margin of safety is $29/share.

Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Wednesday, October 5, 2011

Procter & Gamble: $PG cash flow valuation update


Current Price: ~ $63/share
Projected Yield: ~ 3.31%


Since its founding in 1837, Procter & Gamble has become the world's largest consumer product manufacturer, with a lineup of famous brands. The brands are sold through three global business units, and include Tide laundry detergent, Charmin toilet paper, Pantene shampoo, Cover Girl cosmetics, and Iams pet food. Since 2001, the company has doubled the sales it derives from developing markets, acquired and integrated Wella and Gillette, and sold its pharmaceutical and coffee businesses.

I estimated the firm's WACC today at 6.31% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:

Year
FCF $Millions
2002
6063
2003
7218
2004
7338
2005
6541
2006
8708
2007
10490
2008
12768
2009
11681
2010
13005
2011
9925

Average Annual Growth FCF: ~ 7%
CAGR FCF: ~ 6%
Consensus Forecast Industry 5-Year Growth: ~ 13% per year
Consensus Forecast Company 5-Year Growth: ~ 9% per year

Starting at $9925 million FCF, assuming the company achieves a 5-year growth rate in FCF of 9% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:

Discounted Cash Flow Valuation

Year
FCF $Millions
0
9925
1
10818
2
11792
3
12853
4
14010
5
15271
Terminal Value
263699

The firm's future cash flows, discounted at a WACC of 6.31%, give a present value for the entire firm (Debt + Equity) of $247,693 million. If the firm's fair value of debt is estimated at $35,400 million, then the fair value of the firm's equity could be $212,293 million.  $212,293 million / 2750 million outstanding shares is approximately $77 per share and a 20% margin of safety is $62/share.

Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.