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Yahoo
7 days ago
- Business
- Yahoo
An Intrinsic Calculation For Keurig Dr Pepper Inc. (NASDAQ:KDP) Suggests It's 50% Undervalued
Using the 2 Stage Free Cash Flow to Equity, Keurig Dr Pepper fair value estimate is US$67.07 Current share price of US$33.67 suggests Keurig Dr Pepper is potentially 50% undervalued Our fair value estimate is 74% higher than Keurig Dr Pepper's analyst price target of US$38.62 How far off is Keurig Dr Pepper Inc. (NASDAQ:KDP) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$2.27b US$2.80b US$3.14b US$3.41b US$3.55b US$3.68b US$3.80b US$3.92b US$4.05b US$4.17b Growth Rate Estimate Source Analyst x5 Analyst x5 Analyst x3 Analyst x1 Analyst x1 Est @ 3.55% Est @ 3.37% Est @ 3.24% Est @ 3.15% Est @ 3.09% Present Value ($, Millions) Discounted @ 6.4% US$2.1k US$2.5k US$2.6k US$2.7k US$2.6k US$2.5k US$2.5k US$2.4k US$2.3k US$2.2k ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$24b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$4.2b× (1 + 2.9%) ÷ (6.4%– 2.9%) = US$124b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$124b÷ ( 1 + 6.4%)10= US$67b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$91b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$33.7, the company appears quite good value at a 50% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Keurig Dr Pepper 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 6.4%, which is based on a levered beta of 0.800. 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. See our latest analysis for Keurig Dr Pepper Strength Debt is well covered by earnings. Dividends are covered by earnings and cash flows. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Beverage market. Opportunity Annual earnings are forecast to grow for the next 3 years. Trading below our estimate of fair value by more than 20%. Threat Debt is not well covered by operating cash flow. Annual earnings are forecast to grow slower than the American market. Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Keurig Dr Pepper, there are three important aspects you should further research: Risks: For example, we've discovered 3 warning signs for Keurig Dr Pepper (1 is a bit unpleasant!) that you should be aware of before investing here. Future Earnings: How does KDP'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. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock 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.
Yahoo
29-05-2025
- Business
- Yahoo
Calculating The Intrinsic Value Of WCM Beteiligungs- und Grundbesitz-AG (HMSE:WCMK)
Using the 2 Stage Free Cash Flow to Equity, WCM Beteiligungs- und Grundbesitz-AG fair value estimate is €2.24 Current share price of €1.86 suggests WCM Beteiligungs- und Grundbesitz-AG is potentially trading close to its fair value Peers of WCM Beteiligungs- und Grundbesitz-AG are currently trading on average at a 135% premium How far off is WCM Beteiligungs- und Grundbesitz-AG (HMSE:WCMK) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the forecast future cash flows of the company and discounting them back to today's value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. 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 begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last 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: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (€, Millions) €12.6m €14.0m €15.1m €16.1m €16.8m €17.4m €17.9m €18.4m €18.8m €19.1m Growth Rate Estimate Source Est @ 15.52% Est @ 11.25% Est @ 8.25% Est @ 6.16% Est @ 4.69% Est @ 3.67% Est @ 2.95% Est @ 2.44% Est @ 2.09% Est @ 1.85% Present Value (€, Millions) Discounted @ 6.2% €11.8 €12.4 €12.6 €12.6 €12.5 €12.2 €11.8 €11.4 €11.0 €10.5 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = €119m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (1.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.2%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = €19m× (1 + 1.3%) ÷ (6.2%– 1.3%) = €396m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= €396m÷ ( 1 + 6.2%)10= €218m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is €337m. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of €1.9, the company appears about fair value at a 17% 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. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 WCM Beteiligungs- und Grundbesitz-AG 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 6.2%, which is based on a levered beta of 1.129. 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 WCM Beteiligungs- und Grundbesitz-AG Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For WCM Beteiligungs- und Grundbesitz-AG, we've put together three additional elements you should further examine: Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with WCM Beteiligungs- und Grundbesitz-AG (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process. 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! Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the HMSE 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.
Yahoo
26-05-2025
- Business
- Yahoo
Telekom Malaysia Berhad (KLSE:TM) Shares Could Be 25% Below Their Intrinsic Value Estimate
Using the 2 Stage Free Cash Flow to Equity, Telekom Malaysia Berhad fair value estimate is RM9.18 Telekom Malaysia Berhad's RM6.86 share price signals that it might be 25% undervalued The RM7.62 analyst price target for TM is 17% less than our estimate of fair value How far off is Telekom Malaysia Berhad (KLSE:TM) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. It may sound complicated, but actually it is quite simple! Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. 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. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (MYR, Millions) RM2.35b RM1.95b RM1.92b RM1.92b RM1.95b RM1.98b RM2.03b RM2.09b RM2.15b RM2.22b Growth Rate Estimate Source Analyst x3 Analyst x4 Analyst x3 Est @ 0.10% Est @ 1.17% Est @ 1.91% Est @ 2.43% Est @ 2.79% Est @ 3.05% Est @ 3.22% Present Value (MYR, Millions) Discounted @ 8.4% RM2.2k RM1.7k RM1.5k RM1.4k RM1.3k RM1.2k RM1.2k RM1.1k RM1.0k RM993 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM14b We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.4%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM2.2b× (1 + 3.6%) ÷ (8.4%– 3.6%) = RM49b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM49b÷ ( 1 + 8.4%)10= RM22b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is RM35b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of RM6.9, the company appears a touch undervalued at a 25% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Telekom Malaysia Berhad 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 8.4%, which is based on a levered beta of 0.800. 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 Telekom Malaysia Berhad Strength Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Earnings growth over the past year underperformed the Telecom industry. Dividend is low compared to the top 25% of dividend payers in the Telecom market. Opportunity Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to decline for the next 3 years. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Can we work out why the company is trading at a discount to intrinsic value? For Telekom Malaysia Berhad, there are three relevant factors you should further examine: Risks: Case in point, we've spotted 2 warning signs for Telekom Malaysia Berhad you should be aware of, and 1 of them shouldn't be ignored. Future Earnings: How does TM'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 KLSE 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
Yahoo
18-05-2025
- Business
- Yahoo
A Look At The Fair Value Of Amcorp Global Limited (SGX:S9B)
Amcorp Global's estimated fair value is S$0.13 based on 2 Stage Free Cash Flow to Equity Current share price of S$0.12 suggests Amcorp Global is potentially trading close to its fair value The average premium for Amcorp Global's competitorsis currently 91% In this article we are going to estimate the intrinsic value of Amcorp Global Limited (SGX:S9B) by estimating the company's future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example! Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. 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. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last 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. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (SGD, Millions) S$6.21m S$5.71m S$5.42m S$5.27m S$5.20m S$5.19m S$5.22m S$5.27m S$5.34m S$5.43m Growth Rate Estimate Source Est @ -12.60% Est @ -8.14% Est @ -5.02% Est @ -2.83% Est @ -1.30% Est @ -0.23% Est @ 0.52% Est @ 1.05% Est @ 1.41% Est @ 1.67% Present Value (SGD, Millions) Discounted @ 11% S$5.6 S$4.7 S$4.0 S$3.5 S$3.1 S$2.8 S$2.6 S$2.3 S$2.2 S$2.0 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = S$33m The second stage is also known as Terminal Value, this is the business's cash flow after 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 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 11%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = S$5.4m× (1 + 2.3%) ÷ (11%– 2.3%) = S$66m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= S$66m÷ ( 1 + 11%)10= S$24m The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is S$57m. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of S$0.1, the company appears about fair value at a 9.8% 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. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Amcorp Global 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 11%, which is based on a levered beta of 1.931. 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. See our latest analysis for Amcorp Global Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Amcorp Global, we've put together three important elements you should assess: Risks: For example, we've discovered 2 warning signs for Amcorp Global (1 shouldn't be ignored!) that you should be aware of before investing here. 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! Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX 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
