Latest news with #intrinsicvalue
Yahoo
3 days ago
- Business
- Yahoo
A Look At The Intrinsic Value Of CSX Corporation (NASDAQ:CSX)
Key Insights Using the 2 Stage Free Cash Flow to Equity, CSX fair value estimate is US$35.12 CSX's US$36.32 share price indicates it is trading at similar levels as its fair value estimate Our fair value estimate is 8.3% lower than CSX's analyst price target of US$38.28 Does the August share price for CSX Corporation (NASDAQ:CSX) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the forecast future cash flows of the company and discounting them back 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 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. 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 $10bn in marketcap - there is still time to get in early. Step By Step Through The Calculation We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value: 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF ($, Millions) US$2.87b US$3.23b US$3.65b US$3.88b US$4.07b US$4.25b US$4.42b US$4.58b US$4.74b US$4.90b Growth Rate Estimate Source Analyst x9 Analyst x3 Analyst x1 Analyst x1 Est @ 4.88% Est @ 4.34% Est @ 3.96% Est @ 3.70% Est @ 3.51% Est @ 3.38% Present Value ($, Millions) Discounted @ 8.6% US$2.6k US$2.7k US$2.8k US$2.8k US$2.7k US$2.6k US$2.5k US$2.4k US$2.3k US$2.1k ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$26b 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 (3.1%) 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 8.6%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$4.9b× (1 + 3.1%) ÷ (8.6%– 3.1%) = US$91b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$91b÷ ( 1 + 8.6%)10= US$40b 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$65b. 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$36.3, the company appears around fair value at the time of writing. 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. Important Assumptions The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 CSX 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 8.6%, which is based on a levered beta of 1.198. 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 CSX SWOT Analysis for CSX Strength Debt is well covered by earnings and cashflows. 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 Transportation market. Expensive based on P/E ratio and estimated fair value. Opportunity Annual earnings are forecast to grow for the next 3 years. Threat Annual earnings are forecast to grow slower than the American market. Moving On: Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For CSX, there are three essential factors you should look at: Risks: Be aware that CSX is showing 1 warning sign in our investment analysis , you should know about... Future Earnings: How does CSX'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. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS 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
5 days ago
- Business
- Yahoo
Arnold Van Den Berg's Strategic Moves: A Closer Look at Everest Group Ltd and More
Insights from the Second Quarter 2025 13F Filing Arnold Van Den Berg (Trades, Portfolio) recently submitted the 13F filing for the second quarter of 2025, providing insights into his investment moves during this period. Since founding Century Management in 1974, Arnold Van Den Berg (Trades, Portfolio) has handily beaten all of the indices. Mr. Van Den Berg is a value investor, and considers himself a student of Benjamin Graham. Arnold applies value investment strategies as his investment philosophy. His investment research seeks to determine the appraised value of a company, often referred to as intrinsic value. Investments are then made at a significant discount, normally 40% to 65% below the company's current intrinsic value. This is his margin of safety. Arnold usually holds 35-40 companies when fully invested, and invests primarily in U.S. headquartered companies. Warning! GuruFocus has detected 4 Warning Sign with PHYS. Summary of New Buy Arnold Van Den Berg (Trades, Portfolio) added a total of 10 stocks, among them: The most significant addition was Inc (NASDAQ:AMZN), with 1,442 shares, accounting for 0.09% of the portfolio and a total value of $316,360. The second largest addition to the portfolio was Energy Transfer LP (NYSE:ET), consisting of 14,797 shares, representing approximately 0.08% of the portfolio, with a total value of $268,270. The third largest addition was Enterprise Products Partners LP (NYSE:EPD), with 8,800 shares, accounting for 0.08% of the portfolio and a total value of $272,890. Key Position Increases Arnold Van Den Berg (Trades, Portfolio) also increased stakes in a total of 29 stocks, among them: The most notable increase was UnitedHealth Group Inc (NYSE:UNH), with an additional 8,793 shares, bringing the total to 18,843 shares. This adjustment represents a significant 87.49% increase in share count, a 0.78% impact on the current portfolio, with a total value of $5,878,460. The second largest increase was Generac Holdings Inc (NYSE:GNRC), with an additional 16,801 shares, bringing the total to 22,684. This adjustment represents a significant 285.59% increase in share count, with a total value of $3,248,580. Summary of Sold Out Arnold Van Den Berg (Trades, Portfolio) completely exited 2 of the holdings in the second quarter of 2025, as detailed below: Veren Inc (VRN): Arnold Van Den Berg (Trades, Portfolio) sold all 14,035 shares, resulting in a -0.03% impact on the portfolio. VanEck Preferred Securities ex Financials ETF (PFXF): Arnold Van Den Berg (Trades, Portfolio) liquidated all 50 shares, causing a -0% impact on the portfolio. Key Position Reduces Arnold Van Den Berg (Trades, Portfolio) also reduced positions in 54 stocks. The most significant changes include: Reduced Everest Group Ltd (NYSE:EG) by 8,830 shares, resulting in a -60.44% decrease in shares and a -0.99% impact on the portfolio. The stock traded at an average price of $345.29 during the quarter and has returned -1.18% over the past 3 months and -6.51% year-to-date. Reduced Exxon Mobil Corp (NYSE:XOM) by 5,792 shares, resulting in a -3.56% reduction in shares and a -0.21% impact on the portfolio. The stock traded at an average price of $107.09 during the quarter and has returned -0.75% over the past 3 months and 0.98% year-to-date. Portfolio Overview At the second quarter of 2025, Arnold Van Den Berg (Trades, Portfolio)'s portfolio included 110 stocks, with top holdings including 6.24% in Sprott Physical Gold Trust (PHYS), 4.8% in Exxon Mobil Corp (NYSE:XOM), 3.89% in Coherent Corp (NYSE:COHR), 3.86% in Berkshire Hathaway Inc (NYSE:BRK.B), and 3.82% in EQT Corp (NYSE:EQT). The holdings are mainly concentrated in 9 of the 11 industries: Technology, Energy, Financial Services, Communication Services, Healthcare, Industrials, Basic Materials, Consumer Cyclical, and Real Estate. This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein. This article first appeared on GuruFocus. 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
6 days ago
- Business
- Yahoo
Arnold Van Den Berg's Strategic Moves: A Closer Look at Everest Group Ltd and More
Insights from the Second Quarter 2025 13F Filing Arnold Van Den Berg (Trades, Portfolio) recently submitted the 13F filing for the second quarter of 2025, providing insights into his investment moves during this period. Since founding Century Management in 1974, Arnold Van Den Berg (Trades, Portfolio) has handily beaten all of the indices. Mr. Van Den Berg is a value investor, and considers himself a student of Benjamin Graham. Arnold applies value investment strategies as his investment philosophy. His investment research seeks to determine the appraised value of a company, often referred to as intrinsic value. Investments are then made at a significant discount, normally 40% to 65% below the company's current intrinsic value. This is his margin of safety. Arnold usually holds 35-40 companies when fully invested, and invests primarily in U.S. headquartered companies. Warning! GuruFocus has detected 4 Warning Sign with PHYS. Summary of New Buy Arnold Van Den Berg (Trades, Portfolio) added a total of 10 stocks, among them: The most significant addition was Inc (NASDAQ:AMZN), with 1,442 shares, accounting for 0.09% of the portfolio and a total value of $316,360. The second largest addition to the portfolio was Energy Transfer LP (NYSE:ET), consisting of 14,797 shares, representing approximately 0.08% of the portfolio, with a total value of $268,270. The third largest addition was Enterprise Products Partners LP (NYSE:EPD), with 8,800 shares, accounting for 0.08% of the portfolio and a total value of $272,890. Key Position Increases Arnold Van Den Berg (Trades, Portfolio) also increased stakes in a total of 29 stocks, among them: The most notable increase was UnitedHealth Group Inc (NYSE:UNH), with an additional 8,793 shares, bringing the total to 18,843 shares. This adjustment represents a significant 87.49% increase in share count, a 0.78% impact on the current portfolio, with a total value of $5,878,460. The second largest increase was Generac Holdings Inc (NYSE:GNRC), with an additional 16,801 shares, bringing the total to 22,684. This adjustment represents a significant 285.59% increase in share count, with a total value of $3,248,580. Summary of Sold Out Arnold Van Den Berg (Trades, Portfolio) completely exited 2 of the holdings in the second quarter of 2025, as detailed below: Veren Inc (VRN): Arnold Van Den Berg (Trades, Portfolio) sold all 14,035 shares, resulting in a -0.03% impact on the portfolio. VanEck Preferred Securities ex Financials ETF (PFXF): Arnold Van Den Berg (Trades, Portfolio) liquidated all 50 shares, causing a -0% impact on the portfolio. Key Position Reduces Arnold Van Den Berg (Trades, Portfolio) also reduced positions in 54 stocks. The most significant changes include: Reduced Everest Group Ltd (NYSE:EG) by 8,830 shares, resulting in a -60.44% decrease in shares and a -0.99% impact on the portfolio. The stock traded at an average price of $345.29 during the quarter and has returned -1.18% over the past 3 months and -6.51% year-to-date. Reduced Exxon Mobil Corp (NYSE:XOM) by 5,792 shares, resulting in a -3.56% reduction in shares and a -0.21% impact on the portfolio. The stock traded at an average price of $107.09 during the quarter and has returned -0.75% over the past 3 months and 0.98% year-to-date. Portfolio Overview At the second quarter of 2025, Arnold Van Den Berg (Trades, Portfolio)'s portfolio included 110 stocks, with top holdings including 6.24% in Sprott Physical Gold Trust (PHYS), 4.8% in Exxon Mobil Corp (NYSE:XOM), 3.89% in Coherent Corp (NYSE:COHR), 3.86% in Berkshire Hathaway Inc (NYSE:BRK.B), and 3.82% in EQT Corp (NYSE:EQT). The holdings are mainly concentrated in 9 of the 11 industries: Technology, Energy, Financial Services, Communication Services, Healthcare, Industrials, Basic Materials, Consumer Cyclical, and Real Estate. This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
10-08-2025
- Business
- Yahoo
After Sitting on the Sidelines For 14 Months, Warren Buffett Could Be Buying One of His Favorite Stocks Again
Key Points Warren Buffett has been a net seller of stocks in each of the last 11 quarters. While he doesn't time the market, Buffett won't buy stocks if they don't trade below his estimate of intrinsic value. This stock's price has come down from its all-time high while its financials improve, making it a more appealing value right now. 10 stocks we like better than Berkshire Hathaway › Warren Buffett hasn't seen a lot to like in the stock market recently. In fact, he and his team of investment managers at Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) have been net sellers of stocks for 11 straight quarters. Buffett's stock sales have accelerated over the past five quarters. That includes monster sales of Berkshire's stakes in Apple and Bank of America. In the meantime, he's stopped buying one stock investors had seen him buy consistently each quarter since mid-2018. As a result, Berkshire's cash pile has climbed to a whopping $344 billion. But the market may be offering Buffett an opportunity to start buying his favorite stock again, and investors should consider doing the same. Buffett isn't timing the market Buffett's big stock sales over the last few years and his lack of purchases may be seen by some as the Oracle of Omaha trying to predict the future and time the market. While it might look like market timing, Buffett is merely sticking to what's worked for him as an investor for the last 60 years or so. "We try to price, rather than time, purchases," Buffett wrote in his 1994 letter to shareholders. The same could be said of Berkshire's stock sales. If the market is offering a massive premium on one of Berkshire's holdings, Buffett ought to sell it, pocket the cash, and look for opportunities in stocks trading well below their intrinsic value. That could even include buying Berkshire Hathaway shares themselves. In fact, the board of directors updated its share repurchase policy in 2018, allowing Buffett to buy back shares of the company as long as it traded below its intrinsic value, conservatively determined. Buffett quickly went to work buying back shares following that change, indicating that the stock looked like a bargain. Between 2018 and May 2024, Buffett spent $78 billion buying back shares of Berkshire Hathaway. Over the last 14 months, however, Buffett hasn't spent a single dollar buying back the stock based on Berkshire's quarterly earnings reports. He holds himself to the same high standards he expects of the CEOs of all the companies Berkshire invests in. "All stock repurchases should be price-dependent. What is sensible at a discount to business-value becomes stupid if done at a premium," he wrote in his 2023 letter to shareholders. But Berkshire shares have fallen considerably since Buffett announced he would step down as CEO at the end of the year during the company's annual meeting in May. And after a further sell-off sparked by its second-quarter earnings report, shares are starting to look a lot more appealing. That could open the door for Buffett to start buying back Berkshire's stock. Will Buffett start buying again? Berkshire Hathaway's earnings disappointed many investors, leading the market to sell off the stock. After a stellar 2024, the insurance business is back to more normalized operations, including big payouts earlier this year due to the California wildfires. That's led to a drop in underwriting profits, which pushed the conglomerate's total operating earnings down nearly 4% last quarter. It's worth noting, however, that Berkshire faced significant foreign exchange headwinds last quarter, which negatively affected operating earnings. Berkshire also wrote down its Kraft Heinz investment by $5 billion. That follows a $3 billion impairment charge it took in 2019. That further negatively affected reported earnings. Nonetheless, Buffett has seen the book value per share of Berkshire Hathaway climb, including a 2.1% gain from the first quarter, and a 10.9% increase from a year ago. Combined with the declining stock price over the last three months, Berkshire Hathaway shares now trade for a price-to-book ratio of about 1.5. That's an important valuation, because when Buffett last repurchased shares of Berkshire, the stock traded below that valuation. The stock has rarely dipped below that price since last May. But shares are certainly more attractive after the sell-off. A couple of factors could keep Buffett from buying at the current price. First, Berkshire's marketable equity portfolio is a significant factor in its book value. Buffett may still see most of the stocks in the portfolio as overpriced, especially as stocks continued to climb over the past year. That would push him to require a lower multiple for Berkshire stock, since repurchasing Berkshire shares would also mean purchasing a small piece of its equity portfolio. The other factor is that he may want to use a significant chunk of cash to bolster the railroad business in the near future. Union Pacific and Norfolk Southern have agreed to a merger, threatening the competitiveness of Berkshire's Burlington Northern Santa Fe. When you consider the strength of Berkshire's balance sheet and that it's not relying on insurance float for any capital at this point, it should trade for a higher price-to-book value ratio than it has historically. With shares trading around 1.5 times book value, the stock finally looks to be trading near its intrinsic value again, making it worth buying. Should you buy stock in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,119,863!* Now, it's worth noting Stock Advisor's total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 Bank of America is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple and Union Pacific. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Kraft Heinz and Union Pacific. The Motley Fool has a disclosure policy. After Sitting on the Sidelines For 14 Months, Warren Buffett Could Be Buying One of His Favorite Stocks Again was originally published by The Motley Fool
Yahoo
10-08-2025
- Business
- Yahoo
U.S. Physical Therapy, Inc.'s (NYSE:USPH) Intrinsic Value Is Potentially 91% Above Its Share Price
Key Insights Using the 2 Stage Free Cash Flow to Equity, U.S. Physical Therapy fair value estimate is US$168 Current share price of US$87.68 suggests U.S. Physical Therapy is potentially 48% undervalued Analyst price target for USPH is US$107 which is 36% below our fair value estimate Does the August share price for U.S. Physical Therapy, Inc. (NYSE:USPH) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by estimating the company's future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Don't get put off by the jargon, the math behind it is actually quite straightforward. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. 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. 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 $10bn in marketcap - there is still time to get in early. The Model We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF ($, Millions) US$71.7m US$82.0m US$89.9m US$96.7m US$102.8m US$108.3m US$113.3m US$118.1m US$122.6m US$127.0m Growth Rate Estimate Source Analyst x2 Analyst x1 Est @ 9.61% Est @ 7.65% Est @ 6.28% Est @ 5.32% Est @ 4.65% Est @ 4.18% Est @ 3.85% Est @ 3.62% Present Value ($, Millions) Discounted @ 6.8% US$67.1 US$71.9 US$73.8 US$74.4 US$74.1 US$73.1 US$71.6 US$69.9 US$68.0 US$65.9 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$710m 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 6.8%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$127m× (1 + 3.1%) ÷ (6.8%– 3.1%) = US$3.5b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$3.5b÷ ( 1 + 6.8%)10= US$1.8b 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$2.5b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$87.7, the company appears quite undervalued at a 48% 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. The Assumptions 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 U.S. Physical Therapy 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 6.8%, 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. View our latest analysis for U.S. Physical Therapy SWOT Analysis for U.S. Physical Therapy Strength Earnings growth over the past year exceeded the industry. Debt is not viewed as a risk. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Healthcare 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 Annual earnings are forecast to grow slower than the American market. Next Steps: Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. 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 U.S. Physical Therapy, we've compiled three additional elements you should assess: Risks: To that end, you should be aware of the 1 warning sign we've spotted with U.S. Physical Therapy . Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for USPH's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. 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. 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.
