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Intel Corp: $INTC cash flow valuation update

October 07, 2011 | About:
Eric Cota

Eric Cota

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Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.

I estimated the firm's WACC today at 10.32% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and growth rates:



Year


FCF $Millions


2001


1345


2002


4426


2003


7859


2004


9276


2005


9005


2006


4841


2007


7625


2008


5729


2009


6655


2010


11485


TTM


8673


Average Annual Growth FCF is~ 44%. CAGR FCF is about 27%. Consensus Forecast Industry 5-Year Growth is 16% per year. Consensus Forecast Company 5-Year Growth is about 11% per year.

Starting at $8673 million FCF, assuming the company achieves a 5-year growth rate in FCF of 11% 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



Year


FCF $Millions


0


8673


1


9627


2


10686


3


11861


4


13166


5


14615


Terminal Value


157130


The firm's future cash flows, discounted at a WACC of 10.32%, give a present value for the entire firm (Debt + Equity) of $140,310 million. If the firm's fair value of debt is estimated at $7400 million, then the fair value of the firm's equity could be $132,910 million. $132,910 million / 5250 million outstanding shares is approximately $25 per share and a 20% margin of safety is $20/share.

Sources:

Morningstar.com

Yahoo! Finance

INTC.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate anypositions within the next 72 hours.

About the author:

Eric Cota
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 2.0/5 (7 votes)

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