Motorola, Inc. (MOT)
Discount cash flow analysis
5% margin of safety What's this?
Price history
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $7.09 | $7.04 | $6.99 | |
| Terminal Growth% | 0 | $7.09 | $7.04 | $6.99 |
| +1% | $7.09 | $7.04 | $6.99 |
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 $10.28 (undervalued by 46.23%) - 2 hours ago
- vijaykrishna created a new valuation of $7.09 (overvalued by 1.25%) - 6 months ago
- SethWellbourne created a new valuation of $4.68 (undervalued by 11.43%) - 11 months ago
- GordonGekko created a new valuation of $3.74 (undervalued by 7.16%) - 12 months ago
- TheCrunchBlog created a new valuation of $7.04 (undervalued by 28.94%) - 1 year ago
- GordonGekko created a new valuation of $7.75 (overvalued by 2.39%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 11,642 |
| Net Debt (Long-term borrowings less cash): | -4,283 |
| Equity Value: | 12,368 |
| Number of Shares Outstanding: | 2,265,000,000 |
| Calculated value per share: | $7.04 |
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.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-tough-q3-for-motorola-mot/
Assumptions
Revenue: Reuters aggregates 25 analysts covering $MOT and these analysts have mean estimates of 2008 and 2009 revenues of US$32.3 billion and US$34.7 billion respectively. For our analysis we have used US$32.0 billion in 2008, US$33.0 billion in 2009 and US$33.5 billion in 2010.
Profitability: We have used an EBITDA margin of 3.0% in 2008 rising to 8.0% in 2010. Reuters has $MOT‘s EBITD margin at 1.6% last year and 9.2% over the last five-years. The current share price appears to imply that the market does not believe $MOT can achieve a return to historic profitability.
Capital Expenditure: We have assumed capital expenditures of US$515 million in 2008 then US$600 million per annum moving forward.
Discount Rate: 12.0%.
Terminal Growth Rate: 0.0%. Yes - we are assuming zero growth growing forward.
Our analysis incorporates the cash and debt the $MOT balance sheet – Valuecruncher calculates a net debt number.