Well, if I do a conservative calculation, and override the WACC that this spreadsheet calculates (5.89%) with 8% (my default), I get and intrinsic value of 1.18$/share...
I don't like the way the spreadsheet calculates the WACC, because
a) it uses beta to calculates the cost of equity (relative to market). You assumed a beta of 1.0, which seems kind of low, but the stock has been stable lately. A higher beta would push up the cost of equity and the WACC
b) record low interest rates lower the WACC in heavily leveraged situations (71% weight of debt for STRZQ). It seems counterintuitive that a highly leveraged company has a lower cost of capital than a company that would have not debt.
Again, it is quite instructive to play with the numbers in this spreadsheet, almost more instructive, than just taken the numbers that it gives you. Not surprisingly, just changing some numbers will show that this stock could be quite overvalued (see above), which tells me that the margin of safety isn't there for this stock. |
