Latest news with #stockvaluation
Yahoo
2 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
2 days ago
- Business
- Yahoo
Should You Think About Buying Games Workshop Group PLC (LON:GAW) Now?
Explore Games Workshop Group's Fair Values from the Community and select yours Games Workshop Group PLC (LON:GAW), might not be a large cap stock, but it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of UK£152 to UK£167. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Games Workshop Group's outlook and value based on the most recent financial data to see if there are any catalysts for a price change. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. What's The Opportunity In Games Workshop Group? According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 26.36x is currently trading slightly above its industry peers' ratio of 22.15x, which means if you buy Games Workshop Group today, you'd be paying a relatively reasonable price for it. And if you believe Games Workshop Group should be trading in this range, then there isn't really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Games Workshop Group's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward. See our latest analysis for Games Workshop Group What kind of growth will Games Workshop Group generate? Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Games Workshop Group, it is expected to deliver a negative revenue growth of -1.0% over the next couple of years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term. What This Means For You Are you a shareholder? Currently, GAW appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on GAW, take a look at whether its fundamentals have changed. Are you a potential investor? If you've been keeping an eye on GAW for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help crystallize your views on GAW should the price fluctuate below the industry PE ratio. Diving deeper into the forecasts for Games Workshop Group mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here. If you are no longer interested in Games Workshop Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential. 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.
Globe and Mail
6 days ago
- Business
- Globe and Mail
Prediction: This Artificial Intelligence (AI) Stock Will Outperform Nvidia Through 2030
Key Points Nvidia relies on Taiwan Semiconductor Manufacturing Company to build its high-demand GPUs. TSMC's business relies less on AI developments than Nvidia's, reducing long-term risks. TSMC's valuation leaves it with more upside than Nvidia's stock, which has a lot of future growth priced into it. 10 stocks we like better than Taiwan Semiconductor Manufacturing › If you look back at the past couple of years, there's arguably no stock that has received as much attention as Nvidia (NASDAQ: NVDA). The current artificial intelligence (AI) boom has propelled Nvidia into the spotlight and to being the world's most valuable public company. As of market close on Aug. 8, Nvidia's market cap is $4.55 trillion, more than $570 billion larger than second-place Microsoft. There are plenty of things to love about Nvidia's business, especially regarding AI, but if you're looking for an AI-related stock that could outperform it between now and 2030, my prediction would be Taiwan Semiconductor Manufacturing Company (NYSE: TSM) (TSMC). I'm not saying that in 2030, TSMC will be worth more than Nvidia -- TSMC's market cap is currently around $3.2 trillion less than Nvidia's -- but if today is the starting point, TSMC has a business that puts its stock in a good position to outperform Nvidia's in the next five years. Why has Nvidia's stock been such a hit? Over the past three years, Nvidia's stock is up 920%. When you look at what really matters, Nvidia's business comes down to graphic processing units (GPUs). GPUs are a key part of data centers, which power and enable AI training, deployment, and scaling. Nvidia is far and away the main supplier of AI-focused GPUs, with an estimated market share of over 90%. This virtual monopoly has paid off for Nvidia (quite literally), increasing its revenue from $8.3 billion in its 2023 fiscal first quarter to $44 billion in its 2026 fiscal first quarter (ended April 27). NVDA Revenue (Quarterly) data by YCharts It all starts with TSMC Despite how valuable Nvidia and its GPUs are to the AI world, Nvidia wouldn't be able to produce them without TSMC, the exclusive manufacturer of Nvidia's GPUs and advanced chips. If Nvidia is a flashy sports car in the AI ecosystem, TSMC is the engine that makes its performance possible, which is why I'm comfortable calling the semiconductor manufacturer an AI stock despite not presenting itself as such or having a consumer-facing AI product. It helps to see TSMC's impact by working backward. Consumer-facing products like generative AI (ChatGPT, Gemini, etc.) must be trained using tons of data. This training isn't possible without data centers. Most of these data centers run on Nvidia chips. Nvidia chips are built by TSMC. TSMC's business has fewer long-term risks Although demand for TSMC-manufactured AI-related chips has driven much of its recent revenue growth, it doesn't have to rely solely on them for long-term success. Its high-power computing segment, which includes its AI-related chips, was 60% of its $30 billion in revenue in the second quarter. That's admittedly a decent bit, but TSMC's business relies more on the broad tech world, and not just AI developments. Lots of companies rely on TSMC to manufacture their chips. Everything from smartphones to laptops to cars to gaming consoles to data center servers all contain semiconductors manufactured by TSMC. Its client list includes Apple, Broadcom, AMD, and Qualcomm, just to name a few. TSMC's diversified revenue streams reduce some potential hiccups. If AI spending and demand slows, TSMC has other segments that can pick up the slack. Nvidia's business, on the other hand, will take a major hit. Data centers accounted for over 88% of its revenue last quarter. Valuation matters At the time of this writing, Nvidia is trading at 42.4 times earnings estimates, and TSMC is trading at 24.7 times earning estimates. Although TSMC isn't considered "cheap" by many standards, it's nowhere near as expensive as Nvidia and is much more fairly valued. NVDA PE Ratio (Forward) data by YCharts TSMC's lower valuation leaves much more room for growth over the next five years. At Nvidia's valuation, it seems to have a lot of future growth already priced into the stock, which leaves it susceptible to a sharp pullback if it falls short of its lofty expectations. That's not to say that TSMC's stock can't experience a pullback, but its valuation gives it a larger margin of error and more upside. When we look back five years from now, I wouldn't be the least bit surprised to see TSMC's stock has outperformed Nvidia's from this point. Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now? Before you buy stock in Taiwan Semiconductor Manufacturing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing 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 11, 2025
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.
Yahoo
09-08-2025
- Business
- Yahoo
OpenAI in talks for share sale at $500 bil valuation
A secondary sale for OpenAI could serve as a way to incentivise staff to remain at the company who are being offered lavish compensation. OpenAI is in early talks about a potential sale of stock for current and former employees at a valuation of about US$500 billion ($643.6 billion), people briefed on the investment discussions said, marking an enormous gain in value for the artificial intelligence leader. The company is targeting a secondary stock sale in the billions of dollars, the people said, asking to remain anonymous because they weren't authorised to discuss the matter publicly. Existing investors including Thrive Capital have approached OpenAI about buying some of the employee shares, the people said. If the deal goes ahead, it would elevate OpenAI's on-paper price tag by roughly two-thirds. Its previous valuation stood at US$300 billion in a US$40 billion financing round led by SoftBank Group — making it one of the largest privately held companies in the world. Representatives for OpenAI and Thrive declined to comment. The latest move follows news last week the start-up had secured US$8.3 billion from a syndicate of investors for a second tranche of that US$40 billion financing, which was oversubscribed by about five times, according to one of the people briefed on the discussions. OpenAI managed to snag that funding ahead of schedule, the person said. Major US start-ups often negotiate share sales for their employees as a way to reward and retain staff, and also attract external investors. The company run by Sam Altman is looking to leverage investor demand to provide employees with liquidity that reflects the company's growth, according to one of the people familiar with the investment negotiations. In recent months, OpenAI lost several members of its research staff to Meta Platforms as the latter firm aggressively recruited top talent from Apple and other competitors for its 'superintelligence' AI team, offering pay packages in the nine-figure range. A secondary sale for OpenAI could serve as a way to incentivise staff to remain at the company who are being offered lavish compensation. OpenAI, whose ChatGPT ushered in a new era of AI development, has overseen a spate of major recent technology launches. Those include a pair of open and freely available artificial intelligence models that can mimic the human process of reasoning, months after China's DeepSeek gained global attention with its own open AI software. It's now preparing the release of its latest GPT-5 model, aimed at shoring up OpenAI's lead in an increasingly competitive sphere. The start-up has announced it expects ChatGPT to reach 700 million weekly active users this week, up from 500 million at the end of March. The app also recently crossed 3 billion user messages a day. And in May, it unveiled plans to acquire the AI device start-up co-founded by Apple veteran Jony Ive in a nearly US$6.5 billion all-stock deal, joining forces with the legendary designer to make a push into hardware. It's also facing a number of challenges. OpenAI's currently in separate discussions about its future as a for-profit company, a negotiation that's dragged on for months. Microsoft, which backed OpenAI with some US$13.75 billion and has the right to use its intellectual property, is the biggest holdout among the ChatGPT maker's investors, Bloomberg previously reported. At issue is the size of Microsoft's stake in a newly configured company. The talks have since broadened into a renegotiation of their relationship, with the software maker seeking to avoid suddenly losing access to the start-up's technology before the end of the current deal, which expires in 2030. See Also: Click here to stay updated with the Latest Business & Investment News in Singapore OpenAI snags US$200 mil contract with US Defense Department Singapore taps on AI to detect fractures, tuberculosis and streamline public healthcare delivery Microsoft is key holdout for OpenAI restructuring plan Read more stories about where the money flows, and analysis of the biggest market stories from Singapore and around the World Get in-depth insights from our expert contributors, and dive into financial and economic trends Follow the market issue situation with our daily updates Or want more Lifestyle and Passion stories? Click hereError 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
