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10:37 pm
March 12, 2011
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Discountvalue
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| Member | posts 18 |
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7:51 pm
March 12, 2011
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Jae Jun
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Yes I started the FCF with 13,000m and present value of 11,926.61m.
I also had 0% for the intangibles and 10% decay for both fields.
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8:04 pm
March 11, 2011
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Discountvalue
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| Member | posts 18 |
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Hi Jae,
I used a 9% discount rate and I started the first year of the 10 years FCF with the 8% growth rate, 14,040m, present value of 12,880.73m. Do you start out the first 10 years FCF with 13,000m, present value of 11,926.61m? Thank you!
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7:14 pm
March 11, 2011
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Discountvalue
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| Member | posts 18 |
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10:15 pm
March 10, 2011
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Jae Jun
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Did you adjust the FCF to be 13,000m as I did?
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8:07 pm
March 9, 2011
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Discountvalue
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| Member | posts 18 |
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Hi Jae,
I was wondering how you arrived at an intrinsic value of around 80 for JNJ ? Using a growth rate of 8%, declining for 10 years and a perpetuity rate of 3%, I get an intrinsic value of 110 per share. Am I doing something wrong? I was also interested in how you came up with 8% as a growth rate. Did you use the average ROE or was it a rate you thought was realistic for a big company? Thank you Jae!
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7:54 am
July 27, 2010
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Jae Jun
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For big firms, I use a discount rate of 9% and terminal growth rate is always the same at 3%
i first look at the price vs value growth. And if it is too out of sync, I adjust it accordingly in line with the growth rates.
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5:21 pm
July 26, 2010
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itconsultant
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| Member | posts 34 |
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What did you use as the discount rate and terminal growth rate?
In general for mature firms, do you take the 10 years median FCF growth rate or even lesser than that?
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10:33 pm
June 27, 2010
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Jae Jun
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I would probably say that JNJ is worth around $80.
I put growth at 8% and used $13,000m as the FCF number
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8:11 pm
June 27, 2010
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krackerjack121
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| Member | posts 69 |
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Jae,
What would you feel would be a apprioate value on JNJ's price?
Rocky
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8:41 pm
June 26, 2010
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Jae Jun
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As long as the assumptions are realistic and there is logic and reasoning behind it, there is nothing wrong with tweaking the numbers.
JNJ has a nice dividend, is consistent and recession proof so 25% MOS is perfectly fine in my books as well.
They have the cash to support the business.
I'm not so sure whether I would apply an intrinsic value of above $90 but as long as you buy at a big enough discount that even if you make a mistake, you can exit profitably is very important.
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9:52 pm
June 25, 2010
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krackerjack121
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| Member | posts 69 |
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Post edited 2:53 pm – June 25, 2010 by krackerjack121
I was just doing some playing with the spreadsheet and I determined that Johnson and Johnson may be a nice investment. I tweaked the DCF portion. I used a 9% Discount rate and a 25% Margin of safety. I felt pretty confident that I could lower my margin of safety based on the size of Johnson and Johnson. And since they have been paying increasing dividends over the years. 48 years according to one webpage. Now I realize that by tweaking the numbers on the spreadsheet that I can make anything seem like a good investment. I figured based on the moat the JNJ has that 25% is a safe margin to acquire at. And I was rereading F Wall Street and Joe agrees that for an industry leader a 25% Margin of Safety would be acceptable. JNJ has a wide moat it continues to generate cash and make money as it has for years. So I would be inclined to think that this would be a good investment.
I favour the DCF and since I haven't learned about the EPV yet, I won't take it into consideration. Based on Friday's closing price of $58.70. The DCF rate is $93.15, so that provides a 37% Margin of Safety. It also gives a 3.62% dividend yield. I am a big fan of getting paid to hold a stock while waiting for the price to increase in value to where I feel it should be.
Thoughts?
Rocky
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