Yahoo! Inc. (YHOO)

Discount cash flow analysis

Sell Overvalued by 60.1%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Yahoo! Inc., 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% $17.75 $17.54 $17.33
Terminal Growth% 0 $17.84 $17.62 $17.41
  +1% $17.92 $17.70 $17.48

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 $53.08 (undervalued by 20.25%) - 12 months ago
  • SethWellbourne created a new valuation of $8.91 (overvalued by 49.14%) - over 7 years ago
  • Diegoengel created a new valuation of $8.86 (overvalued by 41.63%) - almost 8 years ago
  • GordonGekko created a new valuation of $14.49 (overvalued by 14.21%) - almost 8 years ago
  • jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - 8 years ago
  • jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - 8 years ago
  • GordonGekko created a new valuation of $14.92 (undervalued by 5.52%) - over 8 years ago
  • SethWellbourne created a new valuation of $7.21 (overvalued by 47.22%) - over 8 years ago
  • SethWellbourne created a new valuation of $10.46 (overvalued by 17.64%) - over 8 years ago
  • turbocarlos created a new valuation of $15.37 (undervalued by 28.4%) - over 8 years ago
  • GordonGekko created a new valuation of $11.35 (undervalued by 7.28%) - almost 9 years ago
  • TheCrunchBlog created a new valuation of $17.62 (undervalued by 36.59%) - almost 9 years ago
  • GordonGekko created a new valuation of $15.43 (undervalued by 21.98%) - almost 9 years ago
  • GordonGekko created a new valuation of $14.80 (overvalued by 3.33%) - almost 9 years ago
  • TheCrunchBlog created a new valuation of $20.07 (overvalued by 27.6%) - over 9 years ago
  • TheCrunchBlog created a new valuation of $23.44 (overvalued by 13.19%) - over 9 years ago
  • TheCrunchBlog created a new valuation of $17.91 (overvalued by 33.67%) - over 9 years ago
  • GordonGekko created a new valuation of $20.07 (overvalued by 25.67%) - over 9 years ago
  • GordonGekko created a new valuation of $22.19 (undervalued by 2.4%) - over 9 years ago
  • KiwiEMH created a new valuation of $19.84 (overvalued by 7.29%) - over 9 years ago
  • GordonGekko created a new valuation of $21.80 (overvalued by 18.66%) - over 9 years ago

Comments

Running The Numbers – Yahoo ($YHOO) trading below intrinsic value

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/10/running-the-numbers-yahoo-yhoo-trading-below-intrinsic-value/

Assumptions

Revenue: Reuters aggregates 25 analysts covering $YHOO and these analysts have mean estimates of 2008 and 2009 revenues of US$5.69 and US$6.42 billion respectively. For our analysis we have used US$5.50 billion in 2008, US$6.15 billion in 2009 and US$6.75 billion in 2010.

Profitability: We have used an EBITDA margin of 33% flat to 2010.

Capital Expenditure: We have assumed capital expenditures of US$700 million in 2008, US$800 million in 2009 and 2010 and then US$750 million beyond that.

Discount Rate: 11.0%.

Terminal Growth Rate: 4.5%.

Our analysis incorporates the cash the $YHOO balance sheet – Valuecruncher calculates a net debt number.

By TheCrunchBlog, almost 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 59,916
Net Debt (Long-term borrowings less cash): -1,251
Equity Value: 17,876
Number of Shares Outstanding: 1,385,000,000
Calculated value per share: $17.62

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.