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1:49 pm
February 26, 2011
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Jae Jun
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Yes you can. But decide whether the business is strong enough to warrant the growth rate you are considering.
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2:42 pm
February 25, 2011
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Discountvalue
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Are you saying that you can use the current P/E as a growth rate for cash flow or did I miss something?
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10:41 am
February 25, 2011
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Jae Jun
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Yes you can do it that way. It's a real simple shorthand that works surprisingly well. I really have to remember which guru it was that did it like that.
But for amazon, I wouldn't mind a growth rate of between 18-22%.
With the new business they keep generating, they should be able to grow much longer.
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8:46 am
February 25, 2011
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Roger
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Allright I didn't know that. What would be the best approach to choose as a growth rate for the company in total in this case. So should I use a similar approach as you state in the example of AAPL in the manual for the spreadsheet?
In that reference you write: "At the time of writing this, AAPL’s PE is 21. The analysts believe AAPL can achieve 18% each year for the next 5 years." and "Assuming that AAPL can grow at 21% for the next 5 years at least, the intrinsic value becomes…."
Please advice.
ty
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8:32 am
February 25, 2011
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Jae Jun
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yes that sounds much better, although 25% growth is for earnings growth and not cash flow growth.
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8:25 am
February 25, 2011
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Roger
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| Member | posts 13 |
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Allright I now get a good chart. According to Yahoo Finance, AMZN's growth will be around 25% for the next 5 years.
Say I would choose an average of 10-12% growth for the longer period and fill this out (together with 9% discount and the option to calculate using FCF instead of owner earnings), is this a good approach?
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7:41 am
February 25, 2011
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Jae Jun
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That's because the spreadsheet calculates based on past performance.
If you look at AMZN FCF, there isn't much growth and it is inconsistent because the company uses so much for growth and working capital.
In the DCF tab, change the FCF to "FCF" instead of owner earnings.
Then select 9% as the discount rate.
Change the growth rate. Refresh it and you will get a better approximation.
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4:31 am
February 25, 2011
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Roger
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| Member | posts 13 |
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Could you take a look at AMZN (Amazon) for a minute with me.
I can see that
the statements are filled out correctly but I see a rather flat intrinsic value
and buy price line in the chart, while the actual price is far above for years –
see attachment.
Morningstar (I logged off the account before starting the
spreadsheet) shows a fair value at US$ 130.-. Even when I manually override the
FCF at an average of 978 million dollar, I still see this chart.
Kind regards,
Roger
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