Bruce Whitfield's Business Week: SAB's booze problem, Carol Paton on trade — and the South African who runs the Edinburgh Fringe
This week, he discusses SA's US trade crisis with News24 journalist Carol Paton, who has the inside scoop on the current state of play.
He also speaks to SA Breweries CEO Richard Rivett-Carnac who warns that booze in SA may be facing the same crisis as the big cigarette makers.
And then, Bruce speaks to the South African who is the new CEO of the Edinburgh Fringe — one of the most important arts festivals in the world.
Certified financial planner Warren Ingram shares practical tips on building wealth.
The podcast is sponsored by Capitec.
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Is Amcor plc (NYSE:AMCR) Trading At A 44% Discount?
Explore Amcor's Fair Values from the Community and select yours Key Insights Using the 2 Stage Free Cash Flow to Equity, Amcor fair value estimate is US$15.55 Amcor's US$8.73 share price signals that it might be 44% undervalued Analyst price target for AMCR is US$11.04 which is 29% below our fair value estimate Today we will run through one way of estimating the intrinsic value of Amcor plc (NYSE:AMCR) by taking the expected future cash flows and discounting them to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Believe it or not, it's not too difficult to follow, as you'll see from our example! We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. What's The Estimated Valuation? We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF ($, Millions) US$1.69b US$2.05b US$1.90b US$1.82b US$1.79b US$1.78b US$1.79b US$1.82b US$1.85b US$1.89b Growth Rate Estimate Source Analyst x6 Analyst x7 Analyst x1 Est @ -3.96% Est @ -1.85% Est @ -0.37% Est @ 0.66% Est @ 1.39% Est @ 1.90% Est @ 2.25% Present Value ($, Millions) Discounted @ 7.3% US$1.6k US$1.8k US$1.5k US$1.4k US$1.3k US$1.2k US$1.1k US$1.0k US$984 US$938 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$13b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.1%. We discount the terminal cash flows to today's value at a cost of equity of 7.3%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$1.9b× (1 + 3.1%) ÷ (7.3%– 3.1%) = US$47b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$47b÷ ( 1 + 7.3%)10= US$23b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$36b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$8.7, the company appears quite good value at a 44% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. Important Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Amcor as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 7.3%, which is based on a levered beta of 0.995. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Amcor SWOT Analysis for Amcor Strength Debt is well covered by earnings. Dividend is in the top 25% of dividend payers in the market. Weakness Earnings declined over the past year. Shareholders have been diluted in the past year. Opportunity Annual earnings are forecast to grow faster than the American market. Trading below our estimate of fair value by more than 20%. Threat Debt is not well covered by operating cash flow. Dividends are not covered by earnings and cashflows. Revenue is forecast to grow slower than 20% per year. Looking Ahead: Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Amcor, there are three further factors you should consider: Risks: To that end, you should learn about the 5 warning signs we've spotted with Amcor (including 3 which are significant) . Future Earnings: How does AMCR's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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an hour ago
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Statutory Profit Doesn't Reflect How Good Gray Media's (NYSE:GTN) Earnings Are
Gray Media, Inc. (NYSE:GTN) recently posted some strong earnings, and the market responded positively. Our analysis found some more factors that we think are good for shareholders. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. How Do Unusual Items Influence Profit? To properly understand Gray Media's profit results, we need to consider the US$134m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Gray Media doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Our Take On Gray Media's Profit Performance Unusual items (expenses) detracted from Gray Media's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Gray Media's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 4 warning signs for Gray Media (of which 2 are potentially serious!) you should know about. Today we've zoomed in on a single data point to better understand the nature of Gray Media's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
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Fact Check: Viral Stimulus Check Claims for Summer Are False, IRS Will Not Send New Checks This Summer
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