Ok, while I don't agree with it because the likelihood is the options
will be converted to shares... the options are already vested... here
it goes.
3 year model for AOL with outstanding shares... not fully
diluted shares. I'll use a P/E of 100 this time and a 60% revenue
growth rate.
Each column represents a full year
(eg."1999" represents a full year of financial results ending June 1999).
Growth rate assumption for Revenue: 60% per year
Net Profit Margins: 15%
P/E used for model: 100 (a premium for being the online leader)
Share Growth: 10% per year
$ and shares in millions
Actual Est. Est. Est.
1999 2000 2001 2002
-------- ------- ------ ------
Revenue $4,800 $7,680 $12,288 $19,661
Net Income $396 $1,152 $1,843 $2,949
Net Profit Margin 8.3% 15% 15% 15%
Outstanding shares 1,082 1,190 1,309 1,440
Market Cap
(Net Income X 100 P/E) $115,200 $184,300 $294,900
Stock Price $96.81 $140.79 $204.79
Discount the $204.79 stock price in year 2002 back at a 15% return
You would be willing to pay
$134.65 for AOL now if you believe the results presented in the model
will occur, and are willing to hold AOL for 3 years, and you are
satisfied with a 15% return on your money per year.
If you say "Well... that 15% return is NOT ENOUGH... I need 30% return."
Discount the $204.79 stock price in year 2002 back at a 30% return
You would be willing to pay
$93.21 for AOL now if you believe the results presented in the model
will occur, and are willing to hold AOL for 3 years, and you are
satisfied with a 30% return on your money per year. |
