Latest news with #intrinsicValue
Yahoo
4 days ago
- Business
- Yahoo
Is Dätwyler Holding AG (VTX:DAE) Trading At A 42% Discount?
The projected fair value for Dätwyler Holding is CHF205 based on 2 Stage Free Cash Flow to Equity Current share price of CHF118 suggests Dätwyler Holding is potentially 42% undervalued Analyst price target for DAE is CHF150 which is 27% below our fair value estimate In this article we are going to estimate the intrinsic value of Dätwyler Holding AG (VTX:DAE) by taking the expected future cash flows and discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward. We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. 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 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. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, 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 (CHF, Millions) CHF115.8m CHF127.8m CHF145.9m CHF164.6m CHF175.7m CHF183.3m CHF189.1m CHF193.5m CHF196.9m CHF199.6m Growth Rate Estimate Source Analyst x2 Analyst x2 Analyst x2 Analyst x2 Analyst x2 Est @ 4.33% Est @ 3.16% Est @ 2.34% Est @ 1.76% Est @ 1.36% Present Value (CHF, Millions) Discounted @ 5.6% CHF110 CHF115 CHF124 CHF132 CHF134 CHF132 CHF129 CHF125 CHF121 CHF116 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CHF1.2b 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. 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 (0.4%) 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 5.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = CHF200m× (1 + 0.4%) ÷ (5.6%– 0.4%) = CHF3.9b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CHF3.9b÷ ( 1 + 5.6%)10= CHF2.2b 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 CHF3.5b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of CHF118, the company appears quite good value at a 42% 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 Dätwyler Holding 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 5.6%, which is based on a levered beta of 1.195. 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. View our latest analysis for Dätwyler Holding Strength Debt is well covered by earnings and cashflows. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Machinery market. Opportunity Annual earnings are forecast to grow faster than the Swiss market. Trading below our estimate of fair value by more than 20%. Threat Dividends are not covered by earnings. Revenue is forecast to grow slower than 20% per year. Whilst important, the DCF calculation 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. Why is the intrinsic value higher than the current share price? For Dätwyler Holding, we've compiled three fundamental aspects you should further examine: Risks: To that end, you should be aware of the 4 warning signs we've spotted with Dätwyler Holding . Future Earnings: How does DAE'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. Simply Wall St updates its DCF calculation for every Swiss 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
4 days ago
- Business
- Yahoo
Calculating The Fair Value Of Dana Incorporated (NYSE:DAN)
Dana's estimated fair value is US$18.04 based on 2 Stage Free Cash Flow to Equity With US$16.63 share price, Dana appears to be trading close to its estimated fair value Analyst price target for DAN is US$19.29, which is 6.9% above our fair value estimate In this article we are going to estimate the intrinsic value of Dana Incorporated (NYSE:DAN) by taking the expected future cash flows and discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$237.9m US$287.0m US$318.6m US$255.6m US$221.8m US$203.2m US$193.1m US$188.1m US$186.3m US$186.7m Growth Rate Estimate Source Analyst x3 Analyst x2 Analyst x2 Analyst x1 Est @ -13.22% Est @ -8.37% Est @ -4.98% Est @ -2.60% Est @ -0.94% Est @ 0.22% Present Value ($, Millions) Discounted @ 9.6% US$217 US$239 US$242 US$177 US$140 US$117 US$102 US$90.2 US$81.5 US$74.6 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$1.5b 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 9.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$187m× (1 + 2.9%) ÷ (9.6%– 2.9%) = US$2.9b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$2.9b÷ ( 1 + 9.6%)10= US$1.1b 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$2.6b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$16.6, the company appears about fair value at a 7.8% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. 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 Dana 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 9.6%, which is based on a levered beta of 1.542. 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 Dana Strength No major strengths identified for DAN. Weakness Interest payments on debt are not well covered. Dividend is low compared to the top 25% of dividend payers in the Auto Components market. Opportunity Expected to breakeven next year. Has sufficient cash runway for more than 3 years based on current free cash flows. Good value based on P/S ratio and estimated fair value. Threat Debt is not well covered by operating cash flow. Paying a dividend but company is unprofitable. Revenue is forecast to decrease over the next 2 years. 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. For Dana, there are three pertinent elements you should look at: Risks: Take risks, for example - Dana has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Future Earnings: How does DAN'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! 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
18-05-2025
- Business
- Yahoo
Estimating The Fair Value Of FITTERS Diversified Berhad (KLSE:FITTERS)
FITTERS Diversified Berhad's estimated fair value is RM0.028 based on 2 Stage Free Cash Flow to Equity FITTERS Diversified Berhad's RM0.03 share price indicates it is trading at similar levels as its fair value estimate Industry average of 226% suggests FITTERS Diversified Berhad's peers are currently trading at a higher premium to fair value Today we will run through one way of estimating the intrinsic value of FITTERS Diversified Berhad (KLSE:FITTERS) by taking the forecast future cash flows of the company and discounting them back 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. 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 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. 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. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (MYR, Millions) RM8.87m RM6.98m RM6.02m RM5.50m RM5.23m RM5.11m RM5.08m RM5.11m RM5.19m RM5.31m Growth Rate Estimate Source Est @ -31.91% Est @ -21.26% Est @ -13.80% Est @ -8.58% Est @ -4.93% Est @ -2.37% Est @ -0.58% Est @ 0.68% Est @ 1.55% Est @ 2.17% Present Value (MYR, Millions) Discounted @ 11% RM8.0 RM5.7 RM4.5 RM3.7 RM3.2 RM2.8 RM2.5 RM2.3 RM2.1 RM2.0 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM37m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. 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 3.6%. 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) = RM5.3m× (1 + 3.6%) ÷ (11%– 3.6%) = RM79m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM79m÷ ( 1 + 11%)10= RM29m The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is RM66m. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of RM0.03, the company appears around fair value at the time of writing. 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. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 FITTERS Diversified 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 11%, which is based on a levered beta of 1.167. 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. View our latest analysis for FITTERS Diversified Berhad Strength Debt is not viewed as a risk. Weakness Current share price is above our estimate of fair value. Opportunity Has sufficient cash runway for more than 3 years based on current free cash flows. Lack of analyst coverage makes it difficult to determine FITTERS' earnings prospects. Threat No apparent threats visible for FITTERS. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. 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. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For FITTERS Diversified Berhad, there are three pertinent items you should further research: Risks: For example, we've discovered 3 warning signs for FITTERS Diversified Berhad (2 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 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
