Becton Dickinson & Co: $BDX cash flow valuation update

Current Price: ~ $74/share
Projected Yield: ~ 2.42%

Becton Dickinson is the world's largest manufacturer and distributor of medical surgical products, such as needles, syringes, and sharps-disposal units. The company also manufactures diagnostic instruments and reagents, as well as flow cytometry and cell-imaging systems. International revenue accounts for 55% of the company's business.

I estimated the firm's WACC today at 6.87% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:

Year	FCF $Millions
2002	576
2003	645
2004	832
2005	909
2006	594
2007	662
2008	1036
2009	1126
2010	1207
2011	1201

Average Annual Growth FCF: ~ 11%

CAGR FCF: ~ 9%

Consensus Forecast Industry 5-Year Growth: ~ 16% per year

Consensus Forecast Company 5-Year Growth: ~ 9% per year

Scenario 1

Starting at $1201 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
1	1309
2	1427
3	1555
4	1695
5	1848
Terminal Value	29297

The firm's future cash flows, discounted at a WACC of 6.87%, give a present value for the entire firm (Debt + Equity) of $27384 million. If the firm's fair value of debt is estimated at $3000 million, then the fair value of the firm's equity could be $24384 million.  $24384 million / 215 million outstanding shares is approximately $113 per share and a 20% margin of safety is $91/share.

Scenario 2

Starting at $1201 million FCF, assuming the company achieves a 5-year growth rate in FCF of 6% per year, and then a growth rate in FCF of 0% per year forever:

Discounted Cash Flow Valuation

Year	FCF $Millions
1	1273
2	1349
3	1430
4	1516
5	1607
Terminal Value	24780

The firm's future cash flows, discounted at a WACC of 6.87%, give a present value for the entire firm (Debt + Equity) of $23631 million. If the firm's fair value of debt is estimated at $3000 million, then the fair value of the firm's equity could be $20631 million.  $20631 million / 215 million outstanding shares is approximately $96 per share and a 20% margin of safety is $77/share.

Sources

Morningstar.com

Yahoo! Finance

BD.com

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

Cisco Systems Inc: $CSCO cash flow valuation update

Current Price: ~ $19/share
Projected Yield: ~ 1.29%

Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and network-management software that allow data communication among dispersed computer networks. The firm has also entered newer markets, such as video conferencing, web-based collaboration, and data center servers.

I estimated the firm's WACC today at 10.98% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:

Year	FCF $Millions
2002	3946
2003	4523
2004	6508
2005	6876
2006	7127
2007	8853
2008	10821
2009	8892
2010	9165
2011	8905

Average Annual Growth FCF: ~ 11%

CAGR FCF: ~ 9%

Consensus Forecast Industry 5-Year Growth: ~ 15% per year

Consensus Forecast Company 5-Year Growth: ~ 8% per year

Starting at $8905 million FCF, assuming the company achieves a 5-year growth rate in FCF of 8% 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
1	9617
2	10387
3	11218
4	12115
5	13084
Terminal Value	128721

The firm's future cash flows, discounted at a WACC of 10.98%, give a present value for the entire firm (Debt + Equity) of $117,531 million. If the firm's fair value of debt is estimated at $18500 million, then the fair value of the firm's equity could be $99031 million.  $99031 million / 5380 million outstanding shares is approximately $18 per share and a 20% margin of safety is $14/share.

Sources

Morningstar.com

Yahoo! Finance

Cisco.com

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

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

Morningstar.com

Yahoo! Finance

INTC.com

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

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

Morningstar.com

Yahoo! Finance

Microsoft.com

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