Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Western Digital Corporation (NASDAQ:WDC) as an investment opportunity by taking the expected future cash flows and discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. It may sound complicated, but actually it is quite simple!
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
See our latest analysis for Western Digital
What's The Estimated Valuation?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF ($, Millions) | US$897.0m | US$772.5m | US$747.5m | US$734.9m | US$730.6m | US$731.8m | US$736.9m | US$744.8m | US$754.7m | US$766.1m |
Growth Rate Estimate Source | Analyst x1 | Analyst x2 | Est @ -3.23% | Est @ -1.68% | Est @ -0.6% | Est @ 0.17% | Est @ 0.7% | Est @ 1.07% | Est @ 1.33% | Est @ 1.51% |
Present Value ($, Millions) Discounted @ 8.6% | US$826 | US$655 | US$584 | US$528 | US$484 | US$446 | US$414 | US$385 | US$359 | US$336 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$5.0b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 8.6%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = US$766m× (1 + 1.9%) ÷ (8.6%– 1.9%) = US$12b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$12b÷ ( 1 + 8.6%)10= US$5.1b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$10b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$32.7, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.
NasdaqGS:WDC Discounted Cash Flow September 28th 2022
Important Assumptions
We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Western Digital as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.6%, which is based on a levered beta of 1.569. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
Next Steps:
Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Western Digital, we've compiled three further factors you should look at:
- Financial Health: Does WDC have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Future Earnings: How does WDC's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
今天,我们将简单介绍一种估值方法,该方法利用预期的未来现金流并将其折现为今天的价值,来评估西部数据公司(CDC:WDC)作为投资机会的吸引力。为此,我们将利用贴现现金流(DCF)模型。这听起来可能很复杂,但实际上很简单!
我们要提醒的是,对一家公司进行估值的方法有很多种,与贴现现金流一样,每种方法在某些情况下都有优缺点。对于那些热衷于学习股票分析的人来说,这里的Simply Wall St.分析模型可能会让你感兴趣。
查看我们对西部数据的最新分析
估计的估价是多少?
我们使用所谓的两阶段模型,也就是说,公司的现金流有两个不同的增长率。一般来说,第一阶段是较高增长阶段,第二阶段是较低增长阶段。首先,我们必须对未来十年的现金流进行估计。在可能的情况下,我们使用分析师的估计,但当这些估计不可用时,我们会根据上次估计或报告的价值推断先前的自由现金流(FCF)。我们假设,自由现金流萎缩的公司将减缓收缩速度,而自由现金流增长的公司在这段时间内的增长速度将放缓。我们这样做是为了反映出,增长在最初几年往往比后来几年放缓得更多。
贴现现金流就是这样一种想法,即未来一美元的价值低于现在的一美元,因此我们需要对这些未来现金流的总和进行贴现,以得出现值估计:
10年自由现金流(FCF)估计
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
杠杆式FCF(百万美元) | 8.97亿美元 | 7.725亿美元 | 7.475亿美元 | 7.349亿美元 | 7.306亿美元 | 7.318亿美元 | 7.369亿美元 | 7.448亿美元 | 7.547亿美元 | 7.661亿美元 |
增长率预估来源 | 分析师x1 | 分析师x2 | Est@-3.23% | Est@-1.68% | Est@-0.6% | Est@0.17% | Est@0.7% | Est@1.07% | Est@1.33% | Est@1.51% |
现值(美元,百万)贴现@8.6% | 826美元 | 655美元 | 584美元 | 528美元 | 484美元 | 446美元 | 414美元 | 385美元 | 359美元 | 336美元 |
(“EST”=Simply Wall St.预估的FCF成长率)
10年期现金流现值(PVCF)=50亿美元
第二阶段也被称为终端价值,这是企业在第一阶段之后的现金流。戈登增长公式用于计算终端价值,其未来年增长率等于10年期政府债券收益率1.9%的5年平均水平。我们以8.6%的权益成本将终端现金流贴现到今天的价值。
终端值(TV)=FCF2032×(1+g)?(r-g)=7.66亿美元×(1+1.9%)?(8.6%-1.9%)=120亿美元
终值现值(PVTV)=TV/(1+r)10=120亿美元?(1+8.6%)10=51亿美元
总价值是未来十年的现金流之和加上贴现的终端价值,这导致总股权价值,在本例中为100亿美元。在最后一步,我们用股本价值除以流通股的数量。与目前32.7美元的股价相比,该公司在撰写本文时似乎接近公允价值。任何计算中的假设都会对估值产生很大影响,因此最好将其视为粗略估计,而不是精确到最后一分钱。
NasdaqGS:WDC贴现现金流2022年9月28日
重要假设
我们要指出,贴现现金流最重要的投入是贴现率,当然还有实际现金流。如果你不同意这些结果,你可以自己试一试计算,并玩弄一下假设。DCF也没有考虑一个行业可能的周期性,也没有考虑一家公司未来的资本要求,因此它没有给出一家公司潜在业绩的全貌。鉴于我们将西部数据视为潜在股东,股权成本被用作贴现率,而不是占债务的资本成本(或加权平均资本成本,WACC)。在这个计算中,我们使用了8.6%,这是基于杠杆率为1.569的测试值。贝塔系数是衡量一只股票相对于整个市场的波动性的指标。我们的贝塔系数来自全球可比公司的行业平均贝塔系数,强制限制在0.8到2.0之间,这是一个稳定业务的合理范围。
接下来的步骤:
尽管一家公司的估值很重要,但理想情况下,它不会是你为一家公司仔细审查的唯一一项分析。贴现现金流模型并不是一个完美的股票估值工具。相反,它应该被视为“什么假设需要成立才能让这只股票被低估或高估”的指南。例如,如果终端价值增长率稍有调整,可能会极大地改变整体结果。对于西部数据,我们收集了另外三个因素,你应该看看:
- 财务状况:WDC是否有健康的资产负债表?看看我们的自由资产负债表分析,对杠杆和风险等关键因素进行了六项简单的检查。
- 未来收益:与同行和更广泛的市场相比,WDC的增长率如何?通过与我们的免费分析师增长预期图表互动,更深入地挖掘分析师对未来几年的共识数字。
- 其他稳固的企业:低债务、高股本回报率和良好的过去业绩是强劲业务的基础。为什么不探索我们具有坚实商业基本面的股票的互动列表,看看是否有其他您可能没有考虑过的公司!
PS.Simply Wall St.每天更新每只美国股票的贴现现金流计算,所以如果你想找出任何其他股票的内在价值,只需搜索此处。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。