QUALCOMM, Inc. (QCOM)

Discount cash flow analysis

Sell Overvalued by 29.0%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for QUALCOMM, 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% $45.51 $44.75 $44.02
Terminal Growth% 0 $45.89 $45.11 $44.37
  +1% $46.27 $45.48 $44.73

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 $65.13 (undervalued by 2.45%) - 12 months ago
  • RichC created a new valuation of $52.86 (overvalued by 3.82%) - 6 years ago
  • SethWellbourne created a new valuation of $27.45 (overvalued by 27.52%) - over 8 years ago
  • dweis created a new valuation of $14.90 (overvalued by 53.16%) - almost 9 years ago
  • KiwiEMH created a new valuation of $43.07 (overvalued by 2.93%) - over 9 years ago
  • GordonGekko created a new valuation of $44.16 (undervalued by 0.14%) - over 9 years ago
  • TheCrunchBlog created a new valuation of $45.11 (undervalued by 0.65%) - over 9 years ago
  • monkeybrand created a new valuation of $49.32 (undervalued by 8.13%) - over 9 years ago

Comments

Qualcomm (QCOM) over US$50 a share – that looks rich

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/07/qualcomm-qcom-over-us50-a-share-that-looks-rich/

QCOMM grew revenues from US$4.88 billion in 2004 to US$8.87 billion in 2007 – a 22% compound annual growth rate. Our assumptions of revenues for the next three years are US$10.5 billion in 2008 growing to US$13.5 billion in 2010 – a 15% compound annual growth rate. We have projected EBITDA margins to grow from 40.0% in 2008 to 45.0% in 2010. We have used a terminal growth rate of 5%. We calculated this terminal growth rate based on year three growth of 11% dropping to a 4.5% stable growth rate by year 10. We believe there is still considerable additional growth in mobile globally to come which QCOM is well positioned for. We used a terminal capital expenditure number of US$1.0 billion. We have used a WACC (discount rate) of 10%.

By TheCrunchBlog, about 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 96,319
Net Debt (Long-term borrowings less cash): -6,581
Equity Value: 71,821
Number of Shares Outstanding: 1,618,000,000
Calculated value per share: $45.11

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.