International Business Machines Corp. (IBM)
Discount cash flow analysis
Price history
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $109.02 | $107.87 | $106.77 | |
| Terminal Growth% | 0 | $109.34 | $108.18 | $107.07 |
| +1% | $109.66 | $108.49 | $107.37 |
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 $292.41 (undervalued by 89.32%) - 4 years ago
- SethWellbourne created a new valuation of $107.39 (overvalued by 16.6%) - over 10 years ago
- geet011984 created a new valuation of $110.88 (overvalued by 5.12%) - over 11 years ago
- geet011984 created a new valuation of $110.88 (overvalued by 5.12%) - over 11 years ago
- GordonGekko created a new valuation of $108.42 (undervalued by 1.12%) - over 11 years ago
- SethWellbourne created a new valuation of $67.82 (overvalued by 28.25%) - over 11 years ago
- Derek created a new valuation of $108.18 (undervalued by 29.4%) - 12 years ago
- TheCrunchBlog created a new valuation of $130.55 (undervalued by 41.12%) - 12 years ago
- GordonGekko created a new valuation of $109.17 (undervalued by 24.41%) - 12 years ago
- TheCrunchBlog created a new valuation of $128.25 (undervalued by 7.39%) - 12 years ago
- GordonGekko created a new valuation of $133.50 (undervalued by 14.63%) - 12 years ago
- KiwiEMH created a new valuation of $131.42 (undervalued by 1.09%) - over 12 years ago
- TheCrunchBlog created a new valuation of $141.42 (undervalued by 19.31%) - over 12 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 228,383 |
| Net Debt (Long-term borrowings less cash): | 19,128 |
| Equity Value: | 113,264 |
| Number of Shares Outstanding: | 1,354,000,000 |
| Calculated value per share: | $108.18 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
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.
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.
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.
Revised numbers downwards in 2009 and 2010
Even with those assumptions (which are completely reasonable) - the valuation is still nearly 30% above the current share price.
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