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Your Valuation
10 June 2008 |
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Valuation Details
| Member: | TheCrunchBlog |
| On: | 31 Jul 2008 |
| Views: | 136 |
| Comments: | 1 |
| Updated: | 3 hours ago |
| Ticker: | JAVA |
| Market: | NASD |
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/07/sun-microsystems-java-all-about-the-profits/
JAVA grew revenues from US$11.19 billion in 2004 to US$13.87 billion in 2007 – a 7.4% compound annual growth rate. Our assumptions of revenues for the next three years are US$14.0 billion in 2009 growing to US$15.0 billion in 2011 – a 2.6% compound annual growth rate (2008-11). We have projected EBITDA margins to be flat at 10.0% to 2011. We have used a terminal growth rate of 2.5%. We used a terminal capital expenditure number of US$600 million. We have used a WACC (discount rate) of 12%.
Based on our analysis the current share price looks undervalued. In our view the key assumption is the EBITDA margin moving forward. If JAVA can increase their EBITDA margin to 12% in 2011 that lifts our valuation to US$13.91 (36% above the current share price). However if JAVA’s EBITDA margin dropped to 8% in 2011 that lowers our valuation to US$9.38 (8% below the current share price).