Yahoo! Inc. (YHOO)

Discount cash flow analysis

Sell Overvalued by 46.9%

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
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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% $23.65 $23.21 $22.80
Terminal Growth% 0 $23.88 $23.44 $23.01
  +1% $24.13 $23.67 $23.24

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%) - over 4 years ago
  • SethWellbourne created a new valuation of $8.91 (overvalued by 49.14%) - almost 11 years ago
  • Diegoengel created a new valuation of $8.86 (overvalued by 41.63%) - 11 years ago
  • GordonGekko created a new valuation of $14.49 (overvalued by 14.21%) - over 11 years ago
  • jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - over 11 years ago
  • jbryanscott created a new valuation of $11.78 (overvalued by 18.76%) - over 11 years ago
  • GordonGekko created a new valuation of $14.92 (undervalued by 5.52%) - almost 12 years ago
  • SethWellbourne created a new valuation of $7.21 (overvalued by 47.22%) - almost 12 years ago
  • SethWellbourne created a new valuation of $10.46 (overvalued by 17.64%) - almost 12 years ago
  • turbocarlos created a new valuation of $15.37 (undervalued by 28.4%) - 12 years ago
  • GordonGekko created a new valuation of $11.35 (undervalued by 7.28%) - over 12 years ago
  • TheCrunchBlog created a new valuation of $17.62 (undervalued by 36.59%) - over 12 years ago
  • GordonGekko created a new valuation of $15.43 (undervalued by 21.98%) - over 12 years ago
  • GordonGekko created a new valuation of $14.80 (overvalued by 3.33%) - over 12 years ago
  • TheCrunchBlog created a new valuation of $20.07 (overvalued by 27.6%) - almost 13 years ago
  • TheCrunchBlog created a new valuation of $23.44 (overvalued by 13.19%) - almost 13 years ago
  • TheCrunchBlog created a new valuation of $17.91 (overvalued by 33.67%) - almost 13 years ago
  • GordonGekko created a new valuation of $20.07 (overvalued by 25.67%) - almost 13 years ago
  • GordonGekko created a new valuation of $22.19 (undervalued by 2.4%) - almost 13 years ago
  • KiwiEMH created a new valuation of $19.84 (overvalued by 7.29%) - almost 13 years ago
  • GordonGekko created a new valuation of $21.80 (overvalued by 18.66%) - almost 13 years ago

Comments

Yahoo Completes Search Deal With Google

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/05/four-futures-of-yahoo/

We agree with Henry Blodget – a deal with Google on search is not US$1 billion of free cash flow to Yahoo. It is more likely to be in the hundreds of millions of dollars range. For simplicity we have assumed that a search deal with Yahoo adds US$1 billion to the top-line revenues. We have kept all our other assumptions from the Yahoo standalone scenario intact.

By TheCrunchBlog, almost 13 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 59,477
Net Debt (Long-term borrowings less cash): -1,251
Equity Value: 37,147
Number of Shares Outstanding: 1,375,000,000
Calculated value per share: $23.44

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.