I attempted this as a super simplified model… does it make sense? i recognize that the valuation here is very sensitive to the terminal free cash flow estimate…
is it ok to forecast CFO as % of revenue?
is it ok to forecast CAPEX as % of revenue?
ALSO… this company has no debt and is authorized to repurchase $500m in shares outstanding with no time frame… how do i incorporate that? does it factor into the per share price target?
ALSO… company pays a dividend (about $60m per year) 3.8% current yield… does the price target (return potential) include dividend plus appreciation as a “total return”? what is the convention with that?
huh you’re taking revenues - CFO + cap ex? You forgot taxes, and since you’re starting off with revenues instead of EBIT, you also need to incorporate other operating income/expenses, SG&A etc…using DCF like you’re doing or my way, which I use unlevered CF starting from EBIT does not get affected by dividend policy - the target price does not change.
no… I’m “estimating” CFO from revenue… the table above is not revenue minus CFO…
I’m just saying that CFO will remain a percentage of revenues as a shortcut… possible for a mature/ stable company… right
just want to confirm that CFO- capex = FCF and if you can approximate those numbers for the next couple of years… then you can ballpark the equity value