Intrinsic Value: DCF (Earnings Based)

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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: 12% 2. Growth Rate in the growth stage = average earnings growth rate in the past 10 years or 20%, whichever is less 3. Growth stage lasts 10 years 4. Terminal growth rate = 4% 5. The terminal stage last 10 years 6. 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. 7. All of the default settings can be changed.

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