IAC/InterActiveCorp (IACI)

Discount cash flow analysis

Sell Overvalued by 63.9%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for IAC/InterActiveCorp, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $22.07 $21.82 $21.58
Terminal Growth% 0 $22.14 $21.89 $21.64
  +1% $22.20 $21.95 $21.71

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $151.03 (undervalued by 149.22%) - 12 months ago
  • GordonGekko created a new valuation of $19.72 (undervalued by 23.48%) - over 8 years ago
  • GordonGekko created a new valuation of $12.46 (overvalued by 24.53%) - over 8 years ago
  • SethWellbourne created a new valuation of $16.86 (undervalued by 10.63%) - over 8 years ago
  • GordonGekko created a new valuation of $12.01 (overvalued by 17.68%) - over 8 years ago
  • KiwiEMH created a new valuation of $21.91 (undervalued by 17.99%) - 9 years ago
  • TheCrunchBlog created a new valuation of $21.89 (undervalued by 17.88%) - 9 years ago
  • GordonGekko created a new valuation of $20.50 (undervalued by 1.03%) - over 9 years ago

Comments

What to make of IAC Interactive (IACI) – the numbers suggest it is cheap

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/08/what-to-make-of-iac-interactive-the-numbers-suggest-it-is-cheap/

IACI grew revenues from US$5.0 billion in 2004 to US$7.4 billion in 2008 – a 12.6% compound annual growth rate. Our assumptions of revenues for the next three years are US$6.6 billion in 2008 growing to US$7.35 billion in 2010 – a 4.9% compound annual growth rate. We have projected EBITDA margins to grow from 11.0% in 2008 to 12.0% in 2010. We have used a terminal growth rate of 3.5%. We used a terminal capital expenditure number of US$250 million. We have used a WACC (discount rate) of 12%.

By TheCrunchBlog, about 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 15,991
Net Debt (Long-term borrowings less cash): -965
Equity Value: 5,196
Number of Shares Outstanding: 279,000,000
Calculated value per share: $21.89

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.