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As of today, Auburn National Bancorporation, Inc.'s intrinsic value calculated from the Discounted Earnings model is $0.00.
Margin of Safety (DE) using Discounted Earnings model for Auburn National Bancorporation, Inc. is -56.84%.
This is the intrinsic value calculated from the Discounted Earnings model with default parameters. The calculation method is the same as Discounted Cash Flow model except earnings are used in the calculation instead of free cash flow. This is the default method of calculation with GuruFocus DCF calculator.
Usually a two-stage model is used in calculating the intrinsic value with discounted cash flow model. The first stage is called growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.
GuruFocus DCF calculator is a two-stage model. The default values are defined as:
1. Discount Rate: d=12%
2. Growth Rate in the growth stage: g1=-0.20%.
Growth Rate in the growth stage = average earnings growth rate in the past 10 years or 20%, whichever is less => Average Earnings Growth Rate in the past 10 years was -0.20% which is less than 20% => Growth Rate: -0.20%
4. Terminal Growth Rate: g2=4%
3. Years of Growth Stage: y1=10
5. Years of Terminal Growth: y2=10
6. Earnings Per Share: eps=$1.95.
GuruFocus DCF calculator is actually a Discounted Earnings calculator, the earnings per share is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.
All of the default settings can be changed and the results are calculated automatically.
Auburn National Bancorporation, Inc.'s Intrinsic Value (DE) for today is calculated as:
set x = (1+g1)/(1+d) = (1+-0.002)/(1+0.12) = 0.891071428571
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.12) = 0.928571428571
|Margin of Safety (DE)||=||(Intrinsic Value (DE)||-||Current Price)||/||Intrinsic Value (DE)|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
Unlike valuation methods such as Net Current Asset Value, Tangible Book Value per Share, Graham Number, Median Ratio etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.
What you need to know about Discounted Earnings model:1. The Discounted Earnings model evaluates a company based on its future earnings power
You can screen for stocks that trade below their intrinsic value (DCF) and Intrinsic Value (Discounted Earnings) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value (DCF) and Intrinsic Value (Discounted Earnings) can be found in the screen of Undervalued Predictable Companies.