Dell Inc. (DELL)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $19.51 | $19.31 | $19.12 | |
| Terminal Growth% | 0 | $19.56 | $19.36 | $19.17 |
| +1% | $19.61 | $19.41 | $19.21 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $14.20 (overvalued by 2.41%) - 6 hours ago
- GordonGekko created a new valuation of $15.80 (undervalued by 15.84%) - 1 month ago
- diegovillagran created a new valuation of $24.24 (undervalued by 83.92%) - 3 months ago
- diegovillagran created a new valuation of $10.61 (overvalued by 19.5%) - 3 months ago
- macalex12 created a new valuation of $12.70 (overvalued by 11.31%) - 3 months ago
- macalex12 created a new valuation of $11.71 (overvalued by 18.23%) - 3 months ago
- jdlong43 created a new valuation of $9.70 (overvalued by 26.96%) - 8 months ago
- SethWellbourne created a new valuation of $11.59 (undervalued by 22.13%) - 11 months ago
- GordonGekko created a new valuation of $9.21 (overvalued by 0.97%) - 1 year ago
- TheCrunchBlog created a new valuation of $19.24 (undervalued by 26.16%) - 1 year ago
- GordonGekko created a new valuation of $19.09 (undervalued by 25.18%) - 1 year ago
- KiwiEMH created a new valuation of $19.36 (undervalued by 14.35%) - 1 year ago
- GordonGekko created a new valuation of $16.23 (overvalued by 2.41%) - 1 year ago
- GordonGekko created a new valuation of $17.41 (overvalued by 3.22%) - 1 year ago
- GordonGekko created a new valuation of $25.84 (undervalued by 0.82%) - 1 year ago
- TheCrunchBlog created a new valuation of $23.94 (undervalued by 3.82%) - 1 year ago
- TheCrunchBlog created a new valuation of $24.24 (undervalued by 27.04%) - 1 year ago
- GordonGekko created a new valuation of $20.69 (undervalued by 8.44%) - 1 year ago
- BudFox1987 created a new valuation of $18.42 (overvalued by 3.31%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 21,109 |
| Net Debt (Long-term borrowings less cash): | -7,385 |
| Equity Value: | 33,154 |
| Number of Shares Outstanding: | 1,958,000,000 |
| Calculated value per share: | $19.36 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
Revenues grow from $66bn in 2009 to $73.5bn in 2011 - there will be reasonable revenue growth in the near term. EBITDA margins flat at 6.5% - profits will be tight. WACC is 11.5% - there is some uncertainty in the business with global demand concerns off-setting the opportunities in developing markets. Terminal growth is at 3%. CAPEX is $750m in 2009 topping out at $900m.
Valuation of $19.36 is 14% above the current share price. Dell looks cheap.