Sunday, November 24, 2013

Raytheon Company: $RTN Cash Flow Valuation Update

Current Price: ~ $87/share
Yield: ~ 2.46%


Raytheon Company provides technology-driven solutions that provide integrated mission systems for the critical defense and non-defense needs of its customers.


 Raytheon     

RMS13 SM3 Pic 03 JLENS &mdash; which is short for Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System &mdash; is a system of two aerostats, or tethered airships, that float 10,000 feet in the air. The aerostats, each nearly as long as a football field, carry powerful radars that can look deep into enemy territory (photo courtesy of the U.S. Army).   AMDR allows naval forces to quickly respond to a broad spectrum of threats, both present and future. <br> (<a href=/rtnwcm/groups/gallery/documents/digitalasset/rtn_162219.jpg target=_blank>Download High Res Photo</a>)

Estimated WACC for the firm today is 8.49% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year
FCF $Millions
2003
1141
2004
1605
2005
2102
2006
2371
2007
800
2008
1637
2009
2378
2010
1556
2011
1670
2012
1542

YTD Free Cash Flow for nine months ending 9/30/2013 is $1112million; $1483 million annualized







Average Annual Growth FCF: ~ 14.8%
CAGR FCF: ~ 3.4%
Consensus Forecast Industry 5-Year Growth: ~ 12% per year
Consensus Forecast Company 5-Year Growth: ~ 9.6% per year
Internal Growth Rate: ~ 4.8%
Sustainable Growth Rate: ~ 17.4%

Scenario 1
Average FCF (YTD, 2012, 2011, 2010) is $1563 million
  • Start at $1563 million FCF
  • Assume a 5-year growth rate in FCF of 9.6% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
1563
1
1713
2
1878
3
2058
4
2255
5
2472
Terminal Value
31911

The firm's future free cash flows, discounted at a WACC of 8.49%, give a present value for the entire firm (Debt + Equity) of $29291 million. If the firm's fair value of debt is estimated at $5046 million, then the fair value of the firm's equity could be $24245 million.  $24245 million / 319 million outstanding shares is approximately $76 per share and a 20% margin of safety is $61/share.

Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 12% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
1563
1
1751
2
1961
3
2196
4
2459
5
2755
Terminal Value
36340
  • Present Value of the entire firm (Debt + Equity): $32787 million
  • Value of Equity: $27741 million or $87/share
  • 20% margin of safety is $70/share


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

Monday, November 11, 2013

Microsoft Corporation: $MSFT Cash Flow Valuation Update


Current Price: ~ $38/share
Yield: ~ 2.44%


Microsoft Corporation is engaged in developing, manufacturing, licensing and supporting software products, services and entertainment, and device hardware products.          



SurfaceXbox Windows Phone 8


Estimated WACC for the firm today is 9.89% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:

Year
FCF $Millions
2004
13517
2005
15793
2006
12826
2007
15532
2008
18430
2009
15918
2010
22096
2011
24639
2012
29321
2013
24576





Average Annual Growth FCF: ~ 8.6%
CAGR FCF: ~ 6.9%
Consensus Forecast Industry 5-Year Growth: ~ 18% per year
Consensus Forecast Company 5-Year Growth: ~ 7% per year
Internal Growth Rate: ~ 12.2%
Sustainable Growth Rate: ~ 24.6%

Scenario 1
  • Start at $24576 million FCF
  • Assume a 5-year growth rate in FCF of 7% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
24576
1
26296
2
28137
3
30107
4
32214
5
34469
Terminal Value
372954

The firm's future free cash flows, discounted at a WACC of 9.89%, give a present value for the entire firm (Debt + Equity) of $346267 million. If the firm's fair value of debt is estimated at $14600 million, then the fair value of the firm's equity could be $331667 million.  $331667 million / 8350 million outstanding shares is approximately $40 per share and a 20% margin of safety is $32/share.


Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 10.5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
24576
1
27156
2
30008
3
33159
4
36640
5
40488
Terminal Value
452404

  • Present Value of the entire firm (Debt + Equity): $407272 million
  • Value of Equity: $392672 million or $47/share
  • 20% margin of safety is $38/share


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

Campbell Soup Co: $CPB Cash Flow Valuation Update

Current Price: ~ $42/share
Yield: ~ 2.13%


Campbell Soup Co manufactures & sells branded convenience food products. Its five segments are: U.S. Simple Meals, Global Baking & Snacking, International Simple Meals & Beverages, U.S. Beverages & Bolthouse and Foodservice.


 Campbell's Products         

Estimated WACC for the firm today is 6.63% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:
Year
FCF $Millions
2004
456
2005
658
2006
917
2007
340
2008
468
2009
821
2010
742
2011
870
2012
797
2013
683



Average Annual Growth FCF: ~ 13%
CAGR FCF: ~ 4.6%
Consensus Forecast Industry 5-Year Growth: ~ 14% per year
Consensus Forecast Company 5-Year Growth: ~ 6% per year
Internal Growth Rate: ~ 4%
Sustainable Growth Rate: ~ 35%

Scenario 1
  • Start at $683 million FCF
  • Assume a 5-year growth rate in FCF of 6% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
683
1
724
2
767
3
813
4
862
5
914
Terminal Value
14616

The firm's future free cash flows, discounted at a WACC of 6.63%, give a present value for the entire firm (Debt + Equity) of $13959 million. If the firm's fair value of debt is estimated at $3299 million, then the fair value of the firm's equity could be $10660 million.  $10660 million / 314 million outstanding shares is approximately $34 per share and a 20% margin of safety is $27/share.

Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 9.5% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
683
1
748
2
819
3
897
4
982
5
1075
Terminal Value
17761
  • Present Value of the entire firm (Debt + Equity): $16586 million
  • Value of Equity: $13287 million or $42/share
  • 20% margin of safety is $34/share


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