I estimated the firm's WACC today at 5.50% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
CAGR FCF: approx. 15%
Consensus forecast industry five-year growth: approx. 14% per year
Consensus forecast company five-year growth: approx. 8% per year
Assuming the company achieves a five-year growth rate in FCF of 8% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
The firm's future cash flows, discounted at a WACC of 5.50%, give a present value for the entire firm (Debt + Equity) of $33,391 million. If the firm's fair value of debt is estimated at $7361 million, then the fair value of the firm's equity could be $26,030 million. $26,030 million/638 million outstanding shares is approximately $41 per share and a 20% margin of safety is $33 per share.
About the author:
Eric Cota is a value investor for the long term, focused on firms in the S&P 500 that produce solid free cash flow and pay dividends. He looks for undervalued firms using a DCF model and tracks performance on a total return, risk-adjusted basis. More articles at manzanitadrive.blogspot.com and contact cota.eric at gmail