In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.
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Qualcomm Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Intrinsic Stock Value (Valuation Summary)
Year | Value | FCFE_{t} or Terminal value (TV_{t}) | Calculation | Present value at |
---|---|---|---|---|
0^{1} | FCFE_{0} | |||
1 | FCFE_{1} | = × (1 + ) | ||
2 | FCFE_{2} | = × (1 + ) | ||
3 | FCFE_{3} | = × (1 + ) | ||
4 | FCFE_{4} | = × (1 + ) | ||
5 | FCFE_{5} | = × (1 + ) | ||
5 | Terminal value (TV_{5}) | = × (1 + ) ÷ ( – ) | ||
Intrinsic value of Qualcomm Inc. common stock | ||||
Intrinsic value of Qualcomm Inc. common stock (per share) | ||||
Current share price |
Based on: 10-K (reporting date: 2022-09-25).
^{1} See details »
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)
Assumptions | ||
Rate of return on LT Treasury Composite^{1} | R_{F} | |
Expected rate of return on market portfolio^{2} | E(R_{M}) | |
Systematic risk of Qualcomm Inc. common stock | β_{QCOM} | |
Required rate of return on Qualcomm Inc. common stock^{3} | r_{QCOM} |
^{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} r_{QCOM} = R_{F} + β_{QCOM} [E(R_{M}) – R_{F}]
= + [ – ]
=
FCFE Growth Rate (g)
Based on: 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), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-24).
2022 Calculations
^{1} Retention rate = (Net income (loss) attributable to Qualcomm – Dividends) ÷ Net income (loss) attributable to Qualcomm
= ( – ) ÷
=
^{2} Profit margin = 100 × Net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × ÷
=
^{3} Asset turnover = Revenues ÷ Total assets
= ÷
=
^{4} Financial leverage = Total assets ÷ Stockholders’ equity
= ÷
=
^{5} g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=
FCFE growth rate (g) implied by single-stage model
g = 100 × (Equity market value_{0} × r – FCFE_{0}) ÷ (Equity market value_{0} + FCFE_{0})
= 100 × ( × – ) ÷ ( + )
=
where:
Equity market value_{0} = current market value of Qualcomm Inc. common stock (US$ in millions)
FCFE_{0} = the last year Qualcomm Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Qualcomm Inc. common stock
Year | Value | g_{t} |
---|---|---|
1 | g_{1} | |
2 | g_{2} | |
3 | g_{3} | |
4 | g_{4} | |
5 and thereafter | g_{5} |
where:
g_{1} is implied by PRAT model
g_{5} is implied by single-stage model
g_{2}, g_{3} and g_{4} are calculated using linear interpoltion between g_{1} and g_{5}
Calculations
g_{2} = g_{1} + (g_{5} – g_{1}) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g_{3} = g_{1} + (g_{5} – g_{1}) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g_{4} = g_{1} + (g_{5} – g_{1}) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=