(TSE:BBD.B) Trading At A 25% Discount? (Simply Wall St)Wed, January 24, 2024 at 5:08 AM EST Key Insights
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The projected fair value for Bombardier is CA$65.55 based on 2 Stage Free Cash Flow to Equity
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Bombardier is estimated to be 25% undervalued based on current share price of CA$49.00
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The US$79.73 analyst price target for BBD.B is 22% more than our estimate of fair value
How far off is Bombardier Inc. (TSE:BBD.B) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected 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. Believe it or not, it's not too difficult to follow, as you'll see from our example!
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Check out our latest analysis for Bombardier
Crunching The Numbers
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.
https://finance.yahoo.com/news/bombardier-inc-tse-bbd-b-100830550.html