eBay Inc. (EBAY)
Discount cash flow analysis
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $28.39 | $27.97 | $27.56 | |
| Terminal Growth% | 0 | $28.56 | $28.13 | $27.72 |
| +1% | $28.73 | $28.30 | $27.88 |
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 $5.56 (overvalued by 76.86%) - 8 hours ago
- Valuecruncher created a new valuation of $5.56 (overvalued by 76.07%) - 1 day ago
- valuereq created a new valuation of $30.46 (undervalued by 31.75%) - 8 months ago
- valuereq created a new valuation of $30.02 (undervalued by 27.2%) - 9 months ago
- valuereq created a new valuation of $32.01 (undervalued by 35.64%) - 9 months ago
- SethWellbourne created a new valuation of $15.84 (undervalued by 10.85%) - 1 year ago
- SethWellbourne created a new valuation of $15.97 (undervalued by 27.96%) - 1 year ago
- GordonGekko created a new valuation of $13.68 (undervalued by 17.63%) - 1 year ago
- TheCrunchBlog created a new valuation of $23.88 (undervalued by 6.7%) - 1 year ago
- GordonGekko created a new valuation of $22.34 (undervalued by 11.98%) - 1 year ago
- TheCrunchBlog created a new valuation of $28.13 (overvalued by 0.88%) - over 2 years ago
- GordonGekko created a new valuation of $28.82 (undervalued by 1.55%) - over 2 years ago
- BudFox1987 created a new valuation of $49.15 (undervalued by 57.03%) - over 2 years ago
- JStew82 created a new valuation of $21.15 (overvalued by 32.43%) - over 2 years ago
- GordonGekko created a new valuation of $27.65 (overvalued by 11.66%) - over 2 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 26,732 |
| Net Debt (Long-term borrowings less cash): | -4,897 |
| Equity Value: | 37,356 |
| Number of Shares Outstanding: | 1,316,000,000 |
| Calculated value per share: | $28.13 |
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 forms part of this blog post:
http://blog.valuecruncher.com/2008/06/is-ebay-ebay-underpriced/
Our assumptions are revenues of US$9.0 billion in 2008 growing to US$11.5 billion in 2010. We have used a flat EBITDA margin of 37.5% from 2008. We have used a terminal growth rate of 4.8%. We calculated this terminal growth rate based on year three growth of 12.2% dropping to a 4% stable growth rate by year 10. We used a terminal capital expenditure number of US$800 million. We have used a WACC (discount rate) of 11.5%.
Our analysis incorporates the cash on the eBay balance sheet – Valuecruncher calculates a net debt number. Our analysis also incorporates Skype within the current eBay structure. It is possible that eBay will decide to sell the Skype business (Yahoo, Google and Microsoft have been suggested as possible acquirers). There may be a higher value owner of Skype than eBay – but until that situation is clarified we have kept Skype where it is.