Does the November share price for Gogo Inc. (NASDAQ:GOGO) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by projecting its future cash flows and then discounting them to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Don't get put off by the jargon, the math behind it is actually quite straightforward.
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
Check out our latest analysis for Gogo
Is Gogo Fairly Valued?
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. 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.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF ($, Millions) | US$105.1m | US$200.9m | US$171.1m | US$154.4m | US$144.7m | US$139.3m | US$136.4m | US$135.3m | US$135.3m | US$136.1m |
Growth Rate Estimate Source | Analyst x5 | Analyst x3 | Analyst x2 | Est @ -9.76% | Est @ -6.24% | Est @ -3.77% | Est @ -2.05% | Est @ -0.84% | Est @ 0.01% | Est @ 0.6% |
Present Value ($, Millions) Discounted @ 6.1% | US$99.1 | US$179 | US$143 | US$122 | US$108 | US$97.7 | US$90.2 | US$84.3 | US$79.5 | US$75.4 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$1.1b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.0%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.1%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = US$136m× (1 + 2.0%) ÷ (6.1%– 2.0%) = US$3.4b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$3.4b÷ ( 1 + 6.1%)10= US$1.9b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$3.0b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$15.0, the company appears quite good value at a 36% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
NasdaqGS:GOGO Discounted Cash Flow November 8th 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. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own 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 Gogo 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 6.1%, which is based on a levered beta of 0.800. 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.
Looking Ahead:
Valuation is only one side of the coin in terms of building your investment thesis, and 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. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price sitting below the intrinsic value? For Gogo, there are three additional elements you should further research:
- Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Gogo (at least 3 which are concerning) , and understanding them should be part of your investment process.
- Future Earnings: How does GOGO'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks 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.
谷歌公司(納斯達克代碼:GOGO)11月份的股價反映了它的真實價值嗎?今天,我們將通過預測股票未來的現金流,然後將其貼現到今天的價值來估計股票的內在價值。在這種情況下,我們將使用貼現現金流(DCF)模型。不要被行話嚇跑了,它背後的數學實際上是相當簡單的。
我們通常認為,一家公司的價值是它未來將產生的所有現金的現值。然而,貼現現金流只是眾多估值指標中的一個,它也並非沒有缺陷。如果你想了解更多關於貼現現金流的信息,可以在Simply Wall St.分析模型中詳細閲讀這種計算背後的原理。
查看我們對Gogo的最新分析
Gogo的估值公平嗎?
我們將使用兩階段貼現現金流模型,顧名思義,該模型考慮了兩個增長階段。第一階段通常是一個較高的成長期,接近終值,在第二個“穩定增長”階段捕捉到。首先,我們必須對未來十年的現金流進行估計。在可能的情況下,我們使用分析師的估計,但當這些估計不可用時,我們會根據上次估計或報告的價值推斷先前的自由現金流(FCF)。我們假設,自由現金流萎縮的公司將減緩收縮速度,而自由現金流增長的公司在這段時間內的增長速度將放緩。我們這樣做是為了反映出,增長在最初幾年往往比後來幾年放緩得更多。
一般來説,我們假設今天的一美元比未來的一美元更有價值,所以我們將這些未來現金流的價值貼現到以今天美元計算的估計價值:
10年自由現金流(FCF)估計
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
槓桿式FCF(百萬美元) | 1.051億美元 | 2.09億美元 | 1.711億美元 | 1.544億美元 | 1.447億美元 | 1.393億美元 | 1.364億美元 | 1.353億美元 | 1.353億美元 | 1.361億美元 |
增長率預估來源 | 分析師X5 | 分析師x3 | 分析師x2 | Est@-9.76% | Est@-6.24% | Est@-3.77% | Est@-2.05% | Est@-0.84% | Est@0.01% | Est@0.6% |
現值(美元,百萬)貼現@6.1% | 99.1美元 | 179美元 | 143美元 | 122美元 | 108美元 | 97.7美元 | 90.2美元 | 84.3美元 | 79.5美元 | 75.4美元 |
(“EST”=Simply Wall St.預估的FCF成長率)
10年期現金流現值(PVCF)=11億美元
第二階段也被稱為終端價值,這是企業在第一階段之後的現金流。出於一些原因,使用了一個非常保守的增長率,不能超過一個國家的國內生產總值增長率。在這種情況下,我們使用了10年期政府債券收益率的5年平均值(2.0%)來估計未來的增長。與10年“增長”期一樣,我們使用6.1%的權益成本將未來現金流貼現至當前價值。
終端值(TV)=FCF2032×(1+g)?(r-g)=1.36億美元×(1+2.0%)?(6.1%-2.0%)=34億美元
終值現值(PVTV)=TV/(1+r)10=34億美元?(1+6.1%)10=19億美元
那麼,總價值或權益價值就是未來現金流的現值之和,在這種情況下,現金流的現值為30億美元。為了得到每股內在價值,我們將其除以總流通股數量。與目前15.0美元的股價相比,該公司的價值似乎相當不錯,較目前的股價有36%的折讓。不過,請記住,這只是一個大致的估值,就像任何複雜的公式一樣--垃圾輸入,垃圾輸出。
NasdaqGS:Gogo貼現現金流2022年11月8日
重要假設
我們要指出,貼現現金流最重要的投入是貼現率,當然還有實際現金流。投資的一部分是你自己對一家公司未來業績的評估,所以你自己試一試計算,檢查你自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮一家公司未來的資本要求,因此它沒有給出一家公司潛在業績的全貌。鑑於我們將Gogo視為潛在股東,股權成本被用作貼現率,而不是佔債務的資本成本(或加權平均資本成本,WACC)。在這個計算中,我們使用了6.1%,這是基於槓桿率為0.800的測試值。貝塔係數是衡量一隻股票相對於整個市場的波動性的指標。我們的貝塔係數來自全球可比公司的行業平均貝塔係數,強制限制在0.8到2.0之間,這是一個穩定業務的合理範圍。
展望未來:
就構建你的投資論點而言,估值只是硬幣的一面,理想情況下,它不會是你為一家公司仔細審查的唯一分析。貼現現金流模型並不是一個完美的股票估值工具。相反,貼現現金流模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。例如,如果終端價值增長率稍有調整,可能會極大地改變整體結果。股價低於內在價值的原因是什麼?對於Gogo,還有三個額外的元素需要進一步研究:
- 風險例如,考慮一下一直存在的投資風險幽靈。我們已經確定了5個警告信號與Gogo合作(至少涉及3個),瞭解它們應該是你投資過程的一部分。
- 未來收益:與同行和更廣泛的市場相比,Gogo的增長率如何?通過與我們的免費分析師增長預期圖表互動,更深入地挖掘分析師對未來幾年的共識數字。
- 其他高質量替代產品:你喜歡一個好的全能運動員嗎?瀏覽我們的高質量股票互動列表,瞭解您可能會錯過的其他股票!
PS.Simply Wall St.應用程序每天對納斯達克指數的每一隻股票進行現金流貼現估值。如果你想找到其他股票的計算方法,只需搜索此處。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。