Google Inc. (GOOG)
Discount cash flow analysis
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $486.55 | $475.20 | $464.47 | |
| Terminal Growth% | 0 | $493.66 | $481.94 | $470.86 |
| +1% | $501.01 | $488.90 | $477.47 |
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 $145.58 (overvalued by 82.16%) - 11 months ago
- XtremeGator created a new valuation of $891.01 (undervalued by 49.63%) - almost 7 years ago
- XtremeGator created a new valuation of $577.98 (overvalued by 2.94%) - almost 7 years ago
- XtremeGator created a new valuation of $713.61 (undervalued by 19.84%) - almost 7 years ago
- XtremeGator created a new valuation of $636.32 (undervalued by 6.86%) - almost 7 years ago
- XtremeGator created a new valuation of $641.59 (undervalued by 7.75%) - almost 7 years ago
- XtremeGator created a new valuation of $772.34 (undervalued by 29.7%) - almost 7 years ago
- XtremeGator created a new valuation of $1508.36 (undervalued by 153.31%) - almost 7 years ago
- XtremeGator created a new valuation of $738.88 (undervalued by 22.48%) - almost 7 years ago
- XtremeGator created a new valuation of $850.90 (undervalued by 41.04%) - almost 7 years ago
- XtremeGator created a new valuation of $910.17 (undervalued by 50.87%) - almost 7 years ago
- XtremeGator created a new valuation of $910.17 (undervalued by 50.87%) - almost 7 years ago
- XtremeGator created a new valuation of $1037.49 (undervalued by 71.97%) - almost 7 years ago
- XtremeGator created a new valuation of $1084.84 (undervalued by 79.82%) - almost 7 years ago
- XtremeGator created a new valuation of $956.12 (undervalued by 58.48%) - almost 7 years ago
- XtremeGator created a new valuation of $723.92 (undervalued by 20.0%) - almost 7 years ago
- XtremeGator created a new valuation of $1073.62 (undervalued by 77.96%) - almost 7 years ago
- XtremeGator created a new valuation of $1449.61 (undervalued by 140.28%) - almost 7 years ago
- ab747x created a new valuation of $947.29 (undervalued by 53.14%) - almost 7 years ago
- GordonGekko created a new valuation of $583.84 (undervalued by 14.94%) - over 7 years ago
- SethWellbourne created a new valuation of $414.38 (overvalued by 26.82%) - over 7 years ago
- GordonGekko created a new valuation of $589.34 (undervalued by 7.15%) - over 7 years ago
- GordonGekko created a new valuation of $542.07 (overvalued by 7.73%) - over 7 years ago
- sundjn created a new valuation of $402.92 (overvalued by 30.5%) - over 7 years ago
- kuangxiaohui created a new valuation of $456.49 (overvalued by 19.91%) - over 7 years ago
- ensayofr created a new valuation of $232.04 (overvalued by 57.97%) - almost 8 years ago
- ensayofr created a new valuation of $270.60 (overvalued by 50.99%) - almost 8 years ago
- mobajwa created a new valuation of $456.35 (undervalued by 3.0%) - 8 years ago
- GordonGekko created a new valuation of $448.59 (undervalued by 3.92%) - 8 years ago
- tekne created a new valuation of $558.16 (undervalued by 39.93%) - 8 years ago
- tekne created a new valuation of $312.92 (overvalued by 21.55%) - 8 years ago
- Lespe959 created a new valuation of $412.53 (undervalued by 3.42%) - 8 years ago
- GordonGekko created a new valuation of $412.09 (undervalued by 2.14%) - over 8 years ago
- SethWellbourne created a new valuation of $392.92 (undervalued by 3.0%) - over 8 years ago
- SethWellbourne created a new valuation of $521.71 (undervalued by 52.24%) - over 8 years ago
- rthwrm created a new valuation of $370.11 (undervalued by 12.1%) - over 8 years ago
- mlongval created a new valuation of $370.11 (undervalued by 12.1%) - over 8 years ago
- GordonGekko created a new valuation of $369.98 (undervalued by 12.06%) - over 8 years ago
- GordonGekko created a new valuation of $369.64 (undervalued by 16.27%) - over 8 years ago
- rs12345 created a new valuation of $253.99 (overvalued by 16.9%) - over 8 years ago
- rs12345 created a new valuation of $283.27 (overvalued by 7.32%) - over 8 years ago
- nzvikram created a new valuation of $616.76 (undervalued by 74.67%) - over 8 years ago
- tiger created a new valuation of $279.25 (overvalued by 0.06%) - over 8 years ago
- rjbullock created a new valuation of $260.06 (overvalued by 0.9%) - over 8 years ago
- dweis created a new valuation of $273.41 (overvalued by 8.07%) - over 8 years ago
- KiwiEMH created a new valuation of $318.88 (undervalued by 2.86%) - almost 9 years ago
- anoop249 created a new valuation of $472.63 (undervalued by 26.87%) - almost 9 years ago
- TheCrunchBlog created a new valuation of $416.73 (undervalued by 22.87%) - almost 9 years ago
- KiwiEMH created a new valuation of $337.31 (undervalued by 1.6%) - almost 9 years ago
- TheCrunchBlog created a new valuation of $352.67 (overvalued by 7.44%) - almost 9 years ago
- TheCrunchBlog created a new valuation of $304.96 (overvalued by 29.25%) - almost 9 years ago
- TheCrunchBlog created a new valuation of $493.88 (undervalued by 9.96%) - almost 9 years ago
- GordonGekko created a new valuation of $438.65 (undervalued by 5.91%) - almost 9 years ago
- veter created a new valuation of $175.18 (overvalued by 58.29%) - almost 9 years ago
- KiwiEMH created a new valuation of $479.36 (overvalued by 0.78%) - 9 years ago
- GordonGekko created a new valuation of $606.64 (undervalued by 9.3%) - over 9 years ago
- Sam created a new valuation of $473.45 (overvalued by 14.69%) - over 9 years ago
- MarkC created a new valuation of $528.69 (overvalued by 4.74%) - over 9 years ago
- andrew created a new valuation of $260.15 (overvalued by 54.61%) - over 9 years ago
- benkepes created a new valuation of $346.02 (overvalued by 39.96%) - over 9 years ago
- acoy created a new valuation of $487.70 (overvalued by 16.06%) - over 9 years ago
- andrew created a new valuation of $285.51 (overvalued by 47.58%) - over 9 years ago
- TheCrunchBlog created a new valuation of $481.94 (overvalued by 11.13%) - over 9 years ago
- TheCrunchBlog created a new valuation of $590.39 (undervalued by 8.87%) - over 9 years ago
- TheCrunchBlog created a new valuation of $363.22 (overvalued by 33.02%) - over 9 years ago
- TheCrunchBlog created a new valuation of $507.85 (overvalued by 6.35%) - over 9 years ago
- sthapit created a new valuation of $456.39 (overvalued by 15.84%) - over 9 years ago
- GordonGekko created a new valuation of $1038.75 (undervalued by 97.32%) - over 9 years ago
- TheCrunchBlog created a new valuation of $1038.75 (undervalued by 97.32%) - over 9 years ago
- ffarin created a new valuation of $476.03 (overvalued by 9.57%) - over 9 years ago
- matrixxx created a new valuation of $220.11 (overvalued by 54.74%) - over 9 years ago
- DART created a new valuation of $223.63 (overvalued by 55.51%) - over 9 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 242,065 |
| Net Debt (Long-term borrowings less cash): | -14,218 |
| Equity Value: | 170,332 |
| Number of Shares Outstanding: | 314,000,000 |
| Calculated value per share: | $481.94 |
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 part of this blog post:
http://blog.valuecruncher.com/2008/06/a-scenario-approach-to-valuing-google-goog/
Google grew revenues from US$3.2 billion in 2004 to US$16.6 billion in 2007 – a huge 73% compound annual growth rate. Our assumptions of revenues for the next three years are US$22.5 billion in 2008 growing to US$34.5 billion in 2010 – a 27% compound annual growth rate. Year-on-year revenue increases have slowed from 92.5% in 2005 to 56.5% in 2007. We are projecting revenue growth to continue to slow – 35.6% in 2008, 26.7% in 2009 and 21.0% in 2010.
We have projected EBITDA margins at a flat 40%.
We have used a terminal growth rate of 6.5%. We calculated this terminal growth rate based on year three growth (2009 to 2010) of 21% dropping to 18.5% in 2011 and then to a 5% stable growth rate over the next ten years.
We have used a WACC (discount rate) of 10.5%. The WACC (discount rate) has a material impact on a discounted cash flow valuation (as does the terminal growth rate). We think this WACC of 10.5% is reasonable but recognise that the actual number could be as low as 10% or as high as 12-12.5%.
We used a terminal capital expenditure number of US$4.25 billion.
Our analysis incorporates the cash on the Google balance sheet – Valuecruncher calculates a net debt number.
Our analysis gives a valuation of US$481.94 which is 11.1% below the current share price of US$542.30. Our valuation is based on the current share price - it isn’t a target price for the future.