<if i assume less stratospheric growth, such as 15% CAGR for a decade, which is still in the top 1% according to Buffett, and if i then assume only a 5% discount rate (which is less than a 10yr bond), i calculate NPV at 36.75.>
Using Quicken, I started with 2001 pro forma earnings of $790 million and let the software do the rest.
If we assume initial earnings of $790 million grow at a rate of 15.00%, and we discount those future earnings at a rate of 5.00%, we arrive at a net present value for the company's next 10 years of earnings of $13.5 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $34.7 billion. To complete the calculation we add these two figures together, subtract the long-term debt for QCOM ($0), and divide by the outstanding shares (767 million) to get a per share intrinsic value of $62.75.
Perhaps something more realistic?
If we assume initial earnings of $790 million grow at a rate of 25.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $12.9 billion. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $32.1 billion. To complete the calculation we add these two figures together, subtract the long-term debt for QCOM ($0), and divide by the outstanding shares (767 million) to get a per share intrinsic value of $58.64. |
