AT&T Inc. (T)
Discount cash flow analysis
Price history
Sensitivity matrix
-1% |
Discount Rate % 0% |
1% |
||
---|---|---|---|---|
-1% | $39.77 | $39.01 | $38.26 | |
Terminal Growth% | 0 | $40.02 | $39.25 | $38.49 |
+1% | $40.27 | $39.49 | $38.73 |
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 $46.41 (undervalued by 14.39%) - 8 months ago
- wongo created a new valuation of $59.78 (undervalued by 57.56%) - over 4 years ago
- wongo created a new valuation of $59.78 (undervalued by 57.56%) - over 4 years ago
- lausan created a new valuation of $28.91 (undervalued by 14.54%) - over 7 years ago
- GordonGekko created a new valuation of $29.17 (undervalued by 14.89%) - over 7 years ago
- GordonGekko created a new valuation of $29.17 (undervalued by 14.89%) - over 7 years ago
- jtwdc1 created a new valuation of $30.97 (undervalued by 22.36%) - over 7 years ago
- jtwdc1 created a new valuation of $16.68 (overvalued by 34.1%) - over 7 years ago
- SethWellbourne created a new valuation of $20.54 (overvalued by 18.36%) - 8 years ago
- GordonGekko created a new valuation of $25.19 (undervalued by 15.98%) - 8 years ago
- dweis created a new valuation of $53.73 (undervalued by 102.22%) - over 8 years ago
- TheCrunchBlog created a new valuation of $39.25 (undervalued by 26.41%) - almost 9 years ago
- omer created a new valuation of $35.68 (overvalued by 1.95%) - 9 years ago
- GordonGekko created a new valuation of $40.73 (undervalued by 4.92%) - 9 years ago
Comments
The boring details
All amounts in millions | Figures |
Enterprise Value: | 301,183 |
Net Debt (Long-term borrowings less cash): | 62,145 |
Equity Value: | 177,761 |
Number of Shares Outstanding: | 5,892,000,000 |
Calculated value per share: | $39.25 |
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.
This valuation is supplemented by a Valuecruncher Blog post:
http://blog.valuecruncher.com/2008/08/att-looks-like-a-buy-at-30/
Assumptions:
Revenue
AT&T's revenues are forecast to grow to $125 billion in 2010 representing an annualised growth rate of 3.8% driven by AT&T's wireless and data offerings.
Profitability
EBITDA margins are forecast to remain constant at 36% over the next three years.
Discount Rate (WACC)
We have applied a discount rate of 9.00% based on Aswath Damodaran's industry analysis:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm
Terminal Growth Rate
We have used a terminal growth rate of 3%. AT&T's strong wireless growth is offset by declining voice revenues.