Stock Analysis on Net

Qualcomm Inc. (NASDAQ:QCOM)

Present Value of Free Cash Flow to Equity (FCFE) 

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Intrinsic Stock Value (Valuation Summary)

Qualcomm Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 16.42%
01 FCFE0 10,348
1 FCFE1 14,370 = 10,348 × (1 + 38.87%) 12,343
2 FCFE2 18,919 = 14,370 × (1 + 31.65%) 13,959
3 FCFE3 23,542 = 18,919 × (1 + 24.44%) 14,920
4 FCFE4 27,597 = 23,542 × (1 + 17.22%) 15,023
5 FCFE5 30,358 = 27,597 × (1 + 10.01%) 14,196
5 Terminal value (TV5) 520,948 = 30,358 × (1 + 10.01%) ÷ (16.42%10.01%) 243,602
Intrinsic value of Qualcomm Inc. common stock 314,044
 
Intrinsic value of Qualcomm Inc. common stock (per share) $282.67
Current share price $159.83

Based on: 10-K (reporting date: 2024-09-29).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.55%
Expected rate of return on market portfolio2 E(RM) 13.83%
Systematic risk of Qualcomm Inc. common stock βQCOM 1.28
 
Required rate of return on Qualcomm Inc. common stock3 rQCOM 16.42%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rQCOM = RF + βQCOM [E(RM) – RF]
= 4.55% + 1.28 [13.83%4.55%]
= 16.42%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Qualcomm Inc., PRAT model

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Average Sep 29, 2024 Sep 24, 2023 Sep 25, 2022 Sep 26, 2021 Sep 27, 2020 Sep 29, 2019
Selected Financial Data (US$ in millions)
Dividends 3,794 3,584 3,303 3,097 2,972 3,034
Net income 10,142 7,232 12,936 9,043 5,198 4,386
Revenues 38,962 35,820 44,200 33,566 23,531 24,273
Total assets 55,154 51,040 49,014 41,240 35,594 32,957
Stockholders’ equity 26,274 21,581 18,013 9,950 6,077 4,909
Financial Ratios
Retention rate1 0.63 0.50 0.74 0.66 0.43 0.31
Profit margin2 26.03% 20.19% 29.27% 26.94% 22.09% 18.07%
Asset turnover3 0.71 0.70 0.90 0.81 0.66 0.74
Financial leverage4 2.10 2.37 2.72 4.14 5.86 6.71
Averages
Retention rate 0.54
Profit margin 23.76%
Asset turnover 0.75
Financial leverage 3.98
 
FCFE growth rate (g)5 38.87%

Based on: 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-09-24), 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29).

2024 Calculations

1 Retention rate = (Net income – Dividends) ÷ Net income
= (10,1423,794) ÷ 10,142
= 0.63

2 Profit margin = 100 × Net income ÷ Revenues
= 100 × 10,142 ÷ 38,962
= 26.03%

3 Asset turnover = Revenues ÷ Total assets
= 38,962 ÷ 55,154
= 0.71

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 55,154 ÷ 26,274
= 2.10

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.54 × 23.76% × 0.75 × 3.98
= 38.87%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (177,571 × 16.42%10,348) ÷ (177,571 + 10,348)
= 10.01%

where:
Equity market value0 = current market value of Qualcomm Inc. common stock (US$ in millions)
FCFE0 = the last year Qualcomm Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Qualcomm Inc. common stock


FCFE growth rate (g) forecast

Qualcomm Inc., H-model

Microsoft Excel
Year Value gt
1 g1 38.87%
2 g2 31.65%
3 g3 24.44%
4 g4 17.22%
5 and thereafter g5 10.01%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 38.87% + (10.01%38.87%) × (2 – 1) ÷ (5 – 1)
= 31.65%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 38.87% + (10.01%38.87%) × (3 – 1) ÷ (5 – 1)
= 24.44%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 38.87% + (10.01%38.87%) × (4 – 1) ÷ (5 – 1)
= 17.22%