Just Having Fun...For S&G, I performed a DCF analysis on High Arctic. Their FCF ranged from 2.8 - 42.3mm for the past five years (ref: Yahoo! Finance). I used 12.5 FCF/yr, with 9% discount rate, and 2.0/2.5% immediate/perpetual growth expectation. Meaningful?...Meh.
Happy Thanksgiving to all you Americans out there! :)
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Discounted Cash Flow Analysis: HWO
Shares outstanding: 49mm
PV(n) = CF(n)/(1+R)^n R=discount rate, Present value of cash flow in year n
PPV = CF(n)(1+g)/(R-g) g = estimated growth rate of cash flow (over long term), Perpetuity Present Value after n years
USE:
n = 10 calculating present value of future cash flows for the next n years
R = 0.090 estimated discounted rate (conservative)
CF(n) = 12.5 estimated cash flow based on current flows
rexp_inc=0.020 rexp_inc - expected annual increase in revenues / cash flow (percent) (from years 1 - n)
g = 0.025 estimated growth rate (conservative) after year n
↑
PV: Present Value
Year CF (millions) Present Value of CF(millions)
2020 12.50 12.50
2021 12.75 11.70
2022 13.01 10.95
2023 13.27 10.24
2024 13.53 9.59
2025 13.80 8.97
2026 14.08 8.39
2027 14.36 7.85
2028 14.65 7.35
2029 14.94 6.88
subtotal:136.87 94.42
PPV: Perpetuity Present Value
PPV= 235.57 This value brings all future perceived cash flows after year n to year n.
PPV(n)= 99.51 This value calculates the present value of the PPV calculated above at the discount rate (from year n).
PPS = 3.96 Estimated Price-Per-Share derived from calculations above
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Cheers,
JJ