Apple Inc. (AAPL)

Discount cash flow analysis

5% margin of safety What's this?

Within margin of safety Undervalued by 4.8%

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How does this work?

This is an interactive analyst report for Apple Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
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What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $147.99 $145.43 $142.96
Terminal Growth% 0 $149.33 $146.70 $144.19
  +1% $150.69 $148.01 $145.44

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 $140.83 (undervalued by 0.58%) - 10 hours ago
  • divechip created a new valuation of $150.84 (undervalued by 8.14%) - 10 days ago
  • divechip created a new valuation of $140.67 (undervalued by 0.85%) - 10 days ago
  • seamuskrat created a new valuation of $140.59 (undervalued by 3.31%) - 17 days ago
  • jschern created a new valuation of $164.59 (undervalued by 20.16%) - 17 days ago
  • jschern created a new valuation of $116.05 (overvalued by 15.27%) - 17 days ago
  • jschern created a new valuation of $157.75 (undervalued by 15.17%) - 17 days ago
  • GordonGekko created a new valuation of $140.57 (undervalued by 2.63%) - 17 days ago
  • kdevcich created a new valuation of $164.66 (undervalued by 15.37%) - 23 days ago
  • kdevcich created a new valuation of $140.59 (overvalued by 1.49%) - 23 days ago
  • kdevcich created a new valuation of $139.48 (overvalued by 2.27%) - 23 days ago
  • GordonGekko created a new valuation of $139.16 (overvalued by 1.27%) - 28 days ago
  • dimpi created a new valuation of $93.67 (overvalued by 28.38%) - 1 month ago
  • ckc2 created a new valuation of $126.68 (overvalued by 0.44%) - 2 months ago
  • ckc2 created a new valuation of $145.62 (undervalued by 17.53%) - 2 months ago
  • SethWellbourne created a new valuation of $101.20 (overvalued by 16.89%) - 2 months ago
  • Brownmp created a new valuation of $141.59 (undervalued by 14.72%) - 2 months ago
  • GordonGekko created a new valuation of $125.75 (undervalued by 9.35%) - 2 months ago
  • SethWellbourne created a new valuation of $121.48 (undervalued by 2.56%) - 2 months ago
  • SethWellbourne created a new valuation of $115.44 (undervalued by 10.48%) - 3 months ago
  • mlongval created a new valuation of $100.82 (overvalued by 0.76%) - 3 months ago
  • rs12345 created a new valuation of $91.18 (undervalued by 2.63%) - 3 months ago
  • rs12345 created a new valuation of $78.43 (overvalued by 11.72%) - 3 months ago
  • GordonGekko created a new valuation of $96.00 (undervalued by 0.1%) - 7 months ago
  • GordonGekko created a new valuation of $118.87 (undervalued by 10.48%) - 8 months ago
  • GordonGekko created a new valuation of $125.99 (undervalued by 29.79%) - 9 months ago
  • TheCrunchBlog created a new valuation of $163.98 (undervalued by 16.37%) - 9 months ago
  • andrew created a new valuation of $91.09 (overvalued by 49.72%) - 1 year ago
  • LordTrask created a new valuation of $150.67 (overvalued by 16.84%) - 1 year ago
  • benkepes created a new valuation of $74.80 (overvalued by 59.84%) - 1 year ago
  • Abo created a new valuation of $100.47 (overvalued by 46.6%) - 1 year ago
  • jeremy created a new valuation of $199.59 (undervalued by 6.07%) - 1 year ago
  • GordonGekko created a new valuation of $144.74 (overvalued by 19.59%) - 1 year ago
  • lancewiggs created a new valuation of $219.71 (undervalued by 29.45%) - 1 year ago
  • Philip created a new valuation of $116.63 (overvalued by 37.33%) - 1 year ago
  • KiwiEMH created a new valuation of $166.28 (overvalued by 10.65%) - 1 year ago
  • jeremy created a new valuation of $200.12 (undervalued by 7.53%) - 1 year ago
  • TheCrunchBlog created a new valuation of $146.70 (overvalued by 21.17%) - 1 year ago
  • TheCrunchBlog created a new valuation of $197.63 (undervalued by 6.2%) - 1 year ago
  • stuartm created a new valuation of $228.96 (undervalued by 23.52%) - 1 year ago
  • acoy created a new valuation of $96.26 (overvalued by 47.0%) - 1 year ago
  • andrew created a new valuation of $99.27 (overvalued by 40.71%) - 1 year ago
  • Gaurav created a new valuation of $175.53 (overvalued by 5.68%) - 1 year ago
  • TheCrunchBlog created a new valuation of $149.75 (overvalued by 9.95%) - 1 year ago
  • jeremy created a new valuation of $156.43 (overvalued by 6.98%) - 1 year ago

Comments

AAPL Base Case

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/06/getting-apple-to-200-a-share/

Our assumptions are revenues of US$32.8 billion in 2008 growing to US$48.0 billion in 2010. We have used a flat EBITDA margin of 21% from 2008. We have used a terminal growth rate of 5.75%. We calculated that using a present value calculation with the growth rate dropping from 17.5% in 2011 to 3.5% in 2015 (the current projected growth from 2009 to 2010 is 18-20%). We used a terminal capital expenditure number of US$900 million. We have used a WACC (discount rate) of 11.0%.

By TheCrunchBlog, about 1 year ago

The boring details

All amounts in millions Figures
Enterprise Value: 108,058
Net Debt (Long-term borrowings less cash): -15,386
Equity Value: 164,070
Number of Shares Outstanding: 881,000,000
Calculated value per share: $146.70

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

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.


Perpetuity

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.


CAPM model

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.