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Abcam Intrinsic Value: DCF (Earnings Based)

: £3.59 (As of Today)
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As of today (2019-10-14), Abcam's intrinsic value calculated from the Discounted Earnings model is £3.59.

Note: Discounted Earnings model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). Result may not be accurate due to the low predictability of business.

Margin of Safety (Earnings Based) using Discounted Earnings model for Abcam is -210.95%.

LSE:ABC' s Price-to-Intrinsic-Value-DCF (Earnings Based) Range Over the Past 10 Years
Min: 0.78   Max: 4.11
Current: 3.08

0.78
4.11

During the past 13 years, the highest Price-to-Intrinsic-Value-DCF (Earnings Based) Ratio of Abcam was 4.11. The lowest was 0.78. And the median was 1.46.

LSE:ABC's Price-to-Intrinsic-Value-DCF (Earnings Based) is ranked lower than
84% of the 31 Companies
in the Biotechnology industry.

( Industry Median: 1.51 vs. LSE:ABC: 3.08 )

Abcam Intrinsic Value: DCF (Earnings Based) Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Abcam Annual Data
Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 Jun17 Jun18 Jun19
Intrinsic Value: DCF (Earnings Based) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 5.29 5.28 5.89 7.48 3.59

Abcam Semi-Annual Data
Dec09 Jun10 Dec10 Jun11 Dec11 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 Jun17 Dec17 Jun18 Dec18 Jun19
Intrinsic Value: DCF (Earnings Based) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 5.89 0.00 7.48 0.00 3.59

Abcam Intrinsic Value: DCF (Earnings Based) Calculation

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=11.70%
Growth Rate in the growth stage = average earnings growth rate in the past 10 years. If it is higher than 20%, we use 20%. If it is less than 5%, we use 5% instead. => Average Earnings Growth Rate in the past 10 years was 11.70% which is less than 20% and higher than 5% => Growth Rate: 11.70%

3. Years of Growth Stage: y1=10

4. Terminal Growth Rate: g2=4%

5. Years of Terminal Growth: y2=10

6. EPS without NRI: eps without nri=£0.218.
GuruFocus DCF calculator is actually a Discounted Earnings calculator, the Earnings Per Share without NRI 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.

Abcam's Intrinsic Value: DCF (Earnings Based) for today is calculated as:

DCF (Earnings Based)=Earnings per Share (Diluted)*{[(1+g1)/(1+d)+(1+g1)^2/(1+d)^2+...+(1+g1)^10/(1+d)^10]
+(1+g1)^10/(1+d)^10*[(1+g2)/(1+d)+(1+g2)^2/(1+d)^2+...+(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.117)/(1+0.12) = 0.997321428571
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.12) = 0.928571428571

DCF (Earnings Based)=Earnings per Share (Diluted)*{[x+x^2+...+x^10]+x^10*[y+y^2+...+y^10]}
=Earnings per Share (Diluted)*[x*(1-x^10)/(1-x)+x^10*y*(1-y^10)/(1-y)]
=0.218*16.478
=3.59

Margin of Safety (Earnings Based)=(DCF (Earnings Based)-Current Price)/DCF (Earnings Based)
=(3.592204-11.17)/3.592204
=-210.95 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Abcam  (LSE:ABC) Intrinsic Value: DCF (Earnings Based) Explanation

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.


Be Aware

What you need to know about Discounted Earnings model:

1. The Discounted Earnings model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that are relatively consistent performers.
4. The Discounted Earnings model works poorly for inconsistent performers like cyclicals.
5. Your expected return from the investment is a reasonable discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.


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