Best Buy Co (Best Buy Co) Intrinsic Value: DCF (FCF Based)

: $50.60 (As of Today)

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As of today (2024-04-17), Best Buy Co's intrinsic value calculated from the Discounted Cash Flow model is $50.60.

Note: Discounted Cash Flow model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

Best Buy Co's Predictability Rank is 4-Stars.

Margin of Safety (FCF Based) using Discounted Cash Flow model for Best Buy Co is -50.65%.

The industry rank for Best Buy Co's Intrinsic Value: DCF (FCF Based) or its related term are showing as below:

BBY's Price-to-DCF (FCF Based) is ranked worse than
75.71% of 140 companies
in the Retail - Cyclical industry
Industry Median: 0.705 vs BBY: 1.51

Best Buy Co Intrinsic Value: DCF (FCF Based) Historical Data

The historical data trend for Best Buy Co's Intrinsic Value: DCF (FCF Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Best Buy Co Annual Data

Trend

Jan15

Jan16

Jan17

Jan18

Jan19

Jan20

Jan21

Jan22

Jan23

Jan24

Intrinsic Value: DCF (FCF Based)

114.33

55.12

Best Buy Co Quarterly Data
	Apr19	Jul19	Oct19	Jan20	Apr20	Jul20	Oct20	Jan21	Apr21	Jul21	Oct21	Jan22	Apr22	Jul22	Oct22	Jan23	Apr23	Jul23	Oct23	Jan24
Intrinsic Value: DCF (FCF Based)																114.33	239.88	225.59	154.83	55.12

Competitive Comparison

For the Specialty Retail subindustry, Best Buy Co's Price-to-DCF (FCF Based), along with its competitors' market caps and Price-to-DCF (FCF Based) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Best Buy Co Price-to-DCF (FCF Based) Distribution

For the Retail - Cyclical industry and Consumer Cyclical sector, Best Buy Co's Price-to-DCF (FCF Based) distribution charts can be found below:

* The bar in red indicates where Best Buy Co's Price-to-DCF (FCF Based) falls into.

Best Buy Co Intrinsic Value: DCF (FCF Based) Calculation

This is the intrinsic value calculated from the Discounted Cash Flow model with default parameters. In a discounted cash flow model, the future cash flow is estimated based on a cash flow growth rate and a discount rate. The cash flow of the future is discounted to its current value at the discount rate. All of the discounted future cash flow is added together to get the current intrinsic value of the company.

Usually a two-stage model is used when calculating a stock's intrinsic value using a discounted cash flow model. The first stage is called the 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 = 11%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate and rounded up to the nearest integer. It is updated daily. The current risk-free rate is 4.59%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default. Then we added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 10.10%
The Growth Rate in the growth stage is initially set as the default 10-Year FCF Growth Rate (Per Share). In cases where the 10-year growth rate is unavailable, it defaults to using the 5-Year FCF Growth Rate (Per Share). If both the 10-year and 5-year growth rates are unavailable, the system defaults to the 3-Year FCF Growth Rate (Per Share).
However, it's important to note that there is a growth rate range. If the calculated growth rate exceeds 20%, it will be capped at 20%. Conversely, if the calculated growth rate falls below 5%, it will be adjusted to 5% to maintain a reasonable range.
=> Best Buy Co's average Free Cash Flow Growth Rate in the past 10 years was 10.10%, which is between 5% and 20%. => GuruFocus defaults => Growth Rate: 10.10%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. Free Cash Flow per Share: fcf = $3.139.
However, GuruFocus DCF calculator is actually a Discounted Earnings calculator, the EPS 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.

Best Buy Co's Intrinsic Value: DCF (FCF Based) for today is calculated as

Intrinsic Value: DCF (FCF Based)	=	Free Cash Flow per Share	*	{[(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+0.101)/(1+0.11) = 0.99189189189189
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.11) = 0.93693693693694

Intrinsic Value: DCF (FCF Based)

Free Cash Flow per Share

{[x

x^2

...

x^10]

x^10

y^2

...

y^10]}

Free Cash Flow per Share

(1-x^10)

(1-x)

x^10

(1-y^10)

(1-y)]

3.139

16.1205

50.60

Margin of Safety (FCF Based)	=	(Intrinsic Value: DCF (FCF Based)	-	Current Price)	/	Intrinsic Value: DCF (FCF Based)
	=	(50.6	-	76.23)	/	50.6
	=	-50.65 %

Best Buy Co (NYSE:BBY) Intrinsic Value: DCF (FCF Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book per Share, Graham Number, Median PS Value 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 the DCF model:

1. The DCF 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 have relatively consistent performance.
4. The DCF model works poorly for inconsistent performers such as cyclicals.
5. What discount rate should you use? Your expected return from the investment is a good 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.

Best Buy Co Intrinsic Value: DCF (FCF Based) Related Terms

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Best Buy Co (Best Buy Co) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Retail - Cyclical » Best Buy Co Inc (NYSE:BBY) » Definitions » Intrinsic Value: DCF (FCF Based)

Comparable Companies

Traded in Other Exchanges

BBY:Mexico BUY:Germany BUY:Germany BBYY34:Brazil

Address

7601 Penn Avenue South, Richfield, MN, USA, 55423

Website

https://www.investors.bestbuy.com

With $46.3 billion in consolidated fiscal 2023 sales, Best Buy is the largest pure-play consumer electronics retailer in the U.S., boasting roughly 8.5% share of the U.S. market and north of 35% share of offline sales, per our calculations, CTA, and Euromonitor data. The firm generates the bulk of its sales in-store, with mobile phones and tablets, computers, and appliances representing its three largest categories. Recent investments in e-commerce fulfillment, accelerated by the COVID-19 pandemic, have seen the U.S. e-commerce channel roughly double from prepandemic levels, with management estimating that it will represent a mid-30% proportion of sales moving forward.

Executives

Richard M Schulze	10 percent owner	BEST BUY CO INC, 7075 FLYING CLOUD DRIVE, EDEN PRAIRIE MN 55344
Todd G. Hartman	officer: GC, Chief Risk/Comp Officer	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
David C Kimbell	director	8410 W. BRYN MAWR, CHICAGO IL 60631
Kathleen Scarlett	officer: Chief Human Resources Officer	7601 PENN AVE S, RICHFIELD MN 55423
Jason J Bonfig	officer: Chief Merchandising Officer	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Matthew M Bilunas	officer: Chief Financial Officer	C/O BEST BUY CO., INC., 7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Barry Corie S	officer: CFO	7601 PENN AVE S., RICHFIELD MN 55423
Mathew Watson	officer: VP, Finance - Contr. & CAO	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Damien Harmon	officer: Pres., Omnichannel Ops & Serv	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Sima Sistani	director	675 AVENUE OF THE AMERICAS, 6TH FLOOR, NEW YORK NY 10010
Melinda D Whittington	director	THREE LAKES DRIVE, NORTHFIELD IL 60093
Deborah Disanzo	officer: President, Best Buy Health	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Allison Peterson	officer: Chief Customer Officer	7601 PENN AVENUE SOUTH, RICHFIELD MN 55423
Brian A Tilzer	officer: Chief Digital & Tech Officer	CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON D0 HM11
Mark A Irvin	officer: Chief Supply Chain Officer	7601 PENN AVENUE, RICHFIELD MN 55423