eBay Inc. (EBAY)

Discount cash flow analysis

Sell Overvalued by 12.9%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for eBay 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% $28.39 $27.97 $27.56
Terminal Growth% 0 $28.56 $28.13 $27.72
  +1% $28.73 $28.30 $27.88

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 $31.89 (overvalued by 1.21%) - 12 months ago
  • valuereq created a new valuation of $30.46 (undervalued by 31.75%) - almost 8 years ago
  • valuereq created a new valuation of $30.02 (undervalued by 27.2%) - almost 8 years ago
  • valuereq created a new valuation of $32.01 (undervalued by 35.64%) - almost 8 years ago
  • SethWellbourne created a new valuation of $15.84 (undervalued by 10.85%) - over 8 years ago
  • SethWellbourne created a new valuation of $15.97 (undervalued by 27.96%) - over 8 years ago
  • GordonGekko created a new valuation of $13.68 (undervalued by 17.63%) - over 8 years ago
  • TheCrunchBlog created a new valuation of $23.88 (undervalued by 6.7%) - almost 9 years ago
  • GordonGekko created a new valuation of $22.34 (undervalued by 11.98%) - almost 9 years ago
  • TheCrunchBlog created a new valuation of $28.13 (overvalued by 0.88%) - over 9 years ago
  • GordonGekko created a new valuation of $28.82 (undervalued by 1.55%) - over 9 years ago
  • BudFox1987 created a new valuation of $49.15 (undervalued by 57.03%) - over 9 years ago
  • JStew82 created a new valuation of $21.15 (overvalued by 32.43%) - over 9 years ago
  • GordonGekko created a new valuation of $27.65 (overvalued by 11.66%) - over 9 years ago

Comments

Is EBAY Underpriced?

This valuation forms part of this blog post:

http://blog.valuecruncher.com/2008/06/is-ebay-ebay-underpriced/

Our assumptions are revenues of US$9.0 billion in 2008 growing to US$11.5 billion in 2010. We have used a flat EBITDA margin of 37.5% from 2008. We have used a terminal growth rate of 4.8%. We calculated this terminal growth rate based on year three growth of 12.2% dropping to a 4% stable growth rate by year 10. We used a terminal capital expenditure number of US$800 million. We have used a WACC (discount rate) of 11.5%.

Our analysis incorporates the cash on the eBay balance sheet – Valuecruncher calculates a net debt number. Our analysis also incorporates Skype within the current eBay structure. It is possible that eBay will decide to sell the Skype business (Yahoo, Google and Microsoft have been suggested as possible acquirers). There may be a higher value owner of Skype than eBay – but until that situation is clarified we have kept Skype where it is.

By TheCrunchBlog, over 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 37,592
Net Debt (Long-term borrowings less cash): -4,897
Equity Value: 37,356
Number of Shares Outstanding: 1,316,000,000
Calculated value per share: $28.13

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.