【dyna glo electric heater not working】Are Investors Undervaluing Groupon, Inc. (NASDAQ:GRPN) By 42%?
How far off is dyna glo electric heater not workingGroupon, Inc. (
NASDAQ:GRPN
) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the foreast future cash flows of the company and discounting them back to today's value. I will use the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. 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
.
See our latest analysis for Groupon
The calculation
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. 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, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) estimate
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Levered FCF ($, Millions)
US$122.8m
US$190.4m
US$212.0m
US$220.1m
US$231.5m
US$240.3m
US$247.9m
US$254.7m
US$260.9m
US$266.7m
Growth Rate Estimate Source
Analyst x4
Analyst x4
Analyst x2
Analyst x2
Analyst x2
Est @ 3.78%
Est @ 3.17%
Est @ 2.74%
Est @ 2.44%
Est @ 2.23%
Present Value ($, Millions) Discounted @ 11%
US$111
US$155
US$156
US$146
US$139
US$130
US$121
US$112
US$104
US$95.5
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF)
= US$1.3b
After calculating the present value of future cash flows in the intial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond 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 10-year government bond rate (1.7%) 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 11%.
Story continues
Terminal Value (TV)
= FCF
2029
× (1 + g) ÷ (r – g) = US$267m× (1 + 1.7%) ÷ 11%– 1.7%) = US$3.0b
Present Value of Terminal Value (PVTV)
= TV / (1 + r)
10
= US$3.0b÷ ( 1 + 11%)
10
= US$1.1b
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$2.3b. 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$2.4, the company appears quite good value at a 42% discount to where the stock price trades currently. 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:GRPN Intrinsic value, January 1st 2020
The assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 Groupon 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 11%, which is based on a levered beta of 1.669. 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:
Whilst important, DCF calculation shouldn’t be the only metric you look at when researching 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?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price to differ from the intrinsic value? For Groupon, I've put together three important factors you should further examine:
Financial Health
: Does GRPN 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 GRPN'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
: Are there other high quality stocks you could be holding instead of GRPN? 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
.
If you spot an error that warrants correction, please contact the editor at
. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
View comments
-
Are Robust Financials Driving The Recent Rally In Arthur J. Gallagher & Co.'s (NYSE:AJG) Stock?AUD/USD Weekly Price Forecast – Australian Dollar Rallies Significantly For The WeekDollar Up Despite Vaccine Approval and Possibility of U.S. Stimulus MeasuresCoronavirus strands merchant ship crews at sea for monthsINVESTOR ALERT: Kirby McInerney LLP Continues Investigation of Shareholder Claims Against Hallmark Financial Services Inc.Is KB Financial Group, Inc. (KB) A Good Stock To Buy?LOPE SHAREHOLDER ALERT: Lawsuit Filed For Grand Canyon InvestorsThermon Group Holdings, Inc. to Host Earnings CallINVESTOR ALERT: Kirby McInerney LLP Continues Investigation of Shareholder Claims Against Hallmark Financial Services Inc.Coronavirus waivers sent to ‘The Bachelor’ live studio audience members
下一篇:Outlook into the Worldwide Plasma Protein Therapeutics to 2025 - Featuring CSL Behring, Biotest AG & Baxter Among Others
- ·Glencore commits to net zero emissions by 2050
- ·Aligos Therapeutics Appoints Lesley Ann Calhoun as Chief Financial Officer
- ·JPMorgan (JPM) Plans for 20% Rise in 2020-end Trading Bonus
- ·Some J.Crew customer accounts hacked last year, company says
- ·Mortgage Rates Are Lowest Ever; 12.8M Should Refinance
- ·Harpoon Therapeutics Reports Third Quarter 2020 Financial Results and Provides Corporate Update
- ·The Returns At Treatt (LON:TET) Provide Us With Signs Of What's To Come
- ·Tristan Thompson Reveals The Importance Of Patience In Today's World
- ·Glenbriar Announces Agreement to Acquire Kick Pharmaceuticals Inc.
- ·EyePoint Pharmaceuticals (EYPT) Reports Q4 Loss, Tops Revenue Estimates
- ·Crude Oil Price Update – Needs to Hold Major 50% Level at $36.07 to Sustain Upside Momentum
- ·Cara Therapeutics to Announce First Quarter 2020 Financial Results on May 11, 2020
- ·Nio Deliveries Jump 109% In November, Boosts Production Capacity To Keep Pace With Rising Demand
- ·Skeljungur hf.: Changes to terms in market making agreements
- ·Why Semtech (SMTC) Stock Might be a Great Pick
- ·Why looting, protests and COVID-19 haven't pounded the stock market
- ·MERGER INVESTIGATION ALERT: Halper Sadeh LLP Encourages CKH, PS, WDR, and EIDX Shareholders to Contact the Firm
- ·Were Hedge Funds Wrong About Crowding Into RealPage, Inc. (RP)?
- ·Trintech Extends Reporting Capabilities in Its Adra Suite with the Launch of Adra Analytics
- ·ROSEN, INVESTOR COUNSEL, Reminds Beyond Meat, Inc. Investors of Important Deadline in Securities Class Action; Encourages Investors with Losses In Excess of $500K to Contact Firm - BYND
- ·IIOT-OXYS, Provides Business Update on COVID-19
- ·Is Changan Minsheng APLL Logistics Co., Ltd.’s (HKG:1292) CEO Salary Justified?
- ·Transformative Mega Trends Reshaping the Indian ICT Landscape
- ·Companies slammed by coronavirus look to cut contributions to their employees' 401(k)s
- ·Bitcoin Falls 11% In Bearish Trade
- ·Donaldson (DCI) Q1 Earnings & Sales Top Estimates, Decline Y/Y
- ·Nightfood Announces Rouses Markets as Newest Supermarket Distribution Partner
- ·Hermès Opens Significantly Larger Shop in Las Vegas
- ·Iran watchdog passes law on hardening nuclear stance, halting UN inspections
- ·Skeljungur hf.: Changes to terms in market making agreements
- ·Unibail-Rodamco-Westfield (“URW”) announces tender offer results
- ·Genco Shipping & Trading (GNK) Lags Q3 Earnings and Revenue Estimates
- ·Does ICC Holdings, Inc.'s (NASDAQ:ICCH) CEO Pay Reflect Performance?
- ·Outcrop Gold Confirms High Grade Gold & Silver Megapozo Target at Santa Ana
- ·Masco Banks on Repair & Remodeling Business Amid High Costs
- ·Do companies sometimes 'ghost' job applicants? Ask HR