Hi cm1750,
thanks for reading and commenting on the Walmart valuation article. You are correct - my DCF model is a back-of-the-envelope valuation; one that hopefully more often understates rather than overstates the value of a given stock like WMT. The assumed 0% growth rate after five years is too harsh for the reasons you mentioned and you're right that the analyst consensus 5-year growth rate is for EPS not FCF. I just wanted to assume a much lower growth rate for FCF to try and understate rather than overstate WMT's value. You're right again for pointing out that I should consider FCF for an unlevered WMT - that was an oversimplification on my part.
All the best,
Eric Cota
P.S. - I would've replied to you publicly in the comments to my article but gurufocus just recently contacted me for my articles and didn't give me a sign in for their site - I hope they comp me a membership going forward.
cm1750: Regarding PEP, I think it is currently worth roughly $71 so it is at a 9% discount now.
I am using FCF/share for 2013 of $4.66 (= 84% of EPS) and app
Hello CM,
Thank you for sharing your calculation. How do you get to the 2013 FCF?
Happy holidays,
Ben
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thanks for reading and commenting on the Walmart valuation article. You are correct - my DCF model is a back-of-the-envelope valuation; one that hopefully more often understates rather than overstates the value of a given stock like WMT. The assumed 0% growth rate after five years is too harsh for the reasons you mentioned and you're right that the analyst consensus 5-year growth rate is for EPS not FCF. I just wanted to assume a much lower growth rate for FCF to try and understate rather than overstate WMT's value. You're right again for pointing out that I should consider FCF for an unlevered WMT - that was an oversimplification on my part.
All the best,
Eric Cota
P.S. - I would've replied to you publicly in the comments to my article but gurufocus just recently contacted me for my articles and didn't give me a sign in for their site - I hope they comp me a membership going forward.
I am using FCF/share for 2013 of $4.66 (= 84% of EPS) and app
Thank you for sharing your calculation. How do you get to the 2013 FCF?
Happy holidays,
Ben