valuing stocks evaluated from price to book method to price earnins and future earnngs projection as of 2024.
- Freecashflow method
- Pe Ratio
- Book value
- PEG ratio by peterlynch
relative valuation model
- an attempt to measure relative value and not intrinsic value, reflect the current mood of the market
- Price-to-earnings (PE)
- PEG Ratio- Price Earnings Growth
- Enterprise Value to EBITDA Ratio
- Price-to-book (PB) Value Ratio.
- Price/Sales Ratio
- Price-to-cash-flow (PCF):
- PCF ratio = Market price per common share/ Free cash flow per common share
- PS ratio = Market price per common share/ Sales per common share
- PB ratio = Market price per common share/ Book value per common share
- PEG ratio = PE Expected/ % annual growth
- PE ratio = Market price per common share/Earnings per common share
- EBITDA Ratio= EBITDA / Revenue
Price to Book value
Example: kotak bank share intrinsic value
- DCF – By Revenue: Fair value of 1855.52
- DCF – By EBITDA: Fair value of 1878.45
- By EBITDA Multiple: Fair value of 1659.52
- By Revenue Multiple: Fair value of 1636.60
- By Excess Return Model: Fair value of 14.47
- Peter Lynch FV: Fair value of 1424.59
Peter Lynch’s formula is:
Peter Lynch’s Fair Value = (Future EPS Growth Rate + Dividend Yield) / P/E Ratio
Less than a 1 is poor, and 1.5 is okay, but what you’re really looking for is a 2 or better. A Company with a 15 percent growth rate, a 3 percent dividend, and a p/e of 6 would have a fabulous 3.
= Earnings Growth Rate x TTM EPS
= 20.4 x 91.56
= 1,868.47
Relative Valuation PE Multiples trailing & forward pe
| Range | Selected | |
| Trailing P/E multiples | 14.8x – 16.8x | 15.7x |
| Forward P/E multiples | 12.6x – 14.6x | 13.7x |
| Fair Price | 1,327.8 – 1,536.45 | 1,437.95 |
| Upside | -22.8% – -10.7% | -16.4% |
PEG Ratio Peter Lynch’s Fair Value Formula and the PEGy Ratio
PEGY Ratio = P/E Ratio / (Future EPS Growth Rate + Dividend Yield)
PEGY Ratio < 1.0: undervalued.
PEGY Ratio = 1.0: fairly valued.
PEGY Ratio > 1.0: overvalued.
ebitda multiple valuation
EV/EBITDA multiple, is a financial ratio that compares a company’s enterprise value (EV) to its annual earnings before interest, taxes, depreciation, and amortization (EBITDA).
EV= Mcap+ Debt-Cash & cash equivalents
Mcap of Britannia Industries= Rs.89920crs
Debt on the balance sheet = 721.55+1075.70= Rs.1797crs
Cash on the balance sheet=Rs. 77.6crs
EV= 89920+1797-77.6= 88045crs
EBIDTA= Profits before exception items & Tax+ Finance Cost+ Depreciation expense- Other income
= 2379.44+97.81+166.77-292.70
= Rs.2351crs
Thus,
EV/EBIDTA= 88045/2351= 37.45x
EV/EBITDA good ratio
EV/EBITDA values below 10 are seen as healthy
DCF analysis
DCF analysis can also be used to value a company and its equity securities by valuing free cash flow to the firm (FCFF) and free cash flow to equity (FCFE). Whereas dividends are the cash flows actually paid to stockholders, free cash flows are the cash flows available for distribution to shareholders.
FCFF= Cash flow from Operations – Net Investment in Long Term Assets
Calculating Present Value Using Free Cashflow Approach
step 1- Calculate the avg free cashflow- So avg of FY21 & FY20 = Rs.1491.25crs
Step 2- Identify the growth rate- we can assume 15% for the first 5 years and around 10% for the next five years.
Step 3- Estimating the future cashflow for next 10 years
Step 4- Calculate the Terminal Value
terminal Value = FCF * (1 + Terminal Growth Rate) / (Discount Rate – Terminal growth rate)
Step 5- Calculate the present value of these cashflows and the terminal value
Absolute Valuation discounted cash flow
determine the intrinsic value of an asset, irrespective of market conditions or relative comparisons.
Absolute value Stock = Absolute value Business / Number of outstanding shares
Absolute Value = CF1/(1+r)1 + CF2/(1+r)2 + … + CFn/(1+r)n + Terminal Value/(1+r)n
Absolute Value = ∑ni=1 [CFi/(1+r)i + Terminal Value/(1+r)n]
Where,
- CFi = Cash flow in the ith year
- n = Last year of the projection
- r = Discount rate
- dividend discount model (DDM)
- discounted cash flow model (DCF)
What is the difference between DCF and dividend discount model?
DDM: present-day price is worth the sum of all of its future dividend payments when discounted back to their present value.
DDM vs. DCF Valuation: What is the Difference? The dividend discount model (DDM) states that a company is worth the sum of the present value (PV) of all its future dividends, whereas the discounted cash flow model (DCF) states that a company is worth the sum of its discounted future free cash flows (FCFs).
Vivekam fair price Expected market price
- Share price 200,
- TTM EPS 10,
- PE 20
- Insrirnic value set by market 120 60% of market price..
- Profit sensitive portion 80 rupees changes
