Valuepro net

ValuePro.net

ONLINE DCF VALUATION MODEL: ValuePro is an online calculator that prepares DCF valuations for most publicly traded stocks. It provides an input sheet with 20 variables that are used in the valuation. The analyst can accept the given inputs, or change them (it is usually necessary to change a couple of them; the growth rate is normally overstated and the equity risk premium is normally understated). The model calculates the Free Cash Flows to the Firm (FCFF) and then derives the intrinsic value of the stock.

The model calculates the free cash flows to the firm (FCFF) for each of the years during the "Excess Return Period." The analyst can specify the length of this period up to 10 years. The model then calculates the "Corporate Residual Value," the value of the firm beyond the Excess Return Period. That Corporate Residual Value is calculated by capitalizing the Net Operating Profit After Tax (NOPAT) by the Weighted Average Cost of Capital, and then discounting that value back to the present (also at the weighted average cost of capital).

The website can be located at http://www.valuepro.net.

Using ValuePro.net

The purpose of this note is to make sure that you are clear, and comfortable, in using ValuePro.net to conduct a discounted cash flow valuation of a stock. The link to the valuation website is: http://www.valuepro.net The first step after arriving at the ValuePro website is to enter the ticker symbol of the stock that is to be valued. Then click "Get Baseline Valuation." You will then see a page that shows the variables that were used in the valuation, and the "Intrinsic Stock Value" in the upper left side of the screen. Normally, some of the inputs used in the valuation need to be changed. For example, the baseline "Equity Risk Premium %" is 3%. In fact, this measure has historically been in the range of 5% to 6%.

Also, "Growth Rate %" (Revenue growth rate) is often overestimated and needs to be adjusted to a more realistic, and supportable, level.

The "Bond Spread Treasury %" normally requires an adjustment. And, often, a case can be made to change some of the company-specific variables. It is always useful to review the "Cash Flows" generated by the discounted cash flow analysis. That analysis can be obtained by clicking on the tab at the top of the page "Cash Flows." Please note a couple of things: A. The input sheet reveals the definitions of the variables if you click on their titles. For example, a click on "Company Beta" and will open a box with a definition. B. Don't try to change the "Company WACC%" by changing that variable itself. The WACC (Weighted Average Cost of Capital) is computed based on the other inputs. If it is your intent to increase or decrease the WACC, then change the related variables like "10-Yr. Treasury Yield %", "Company Beta", "Equity Risk Premium", "Preferred Stock Yield %" (if any preferred stock is outstanding), "Tax Rate %", or the "Bond Spread Treasury %". All of these variables have an influence on the company's WACC. Then, after making the changes in assumptions, it is necessary to click the tab towards the top of the page "Recalculate." When that is done, it will return a revised "Intrinsic Stock Value," which, in the case of this example, changed it from $64.06 to $40.78. Now, your task is to determine what variables should be changed and the reasons for the changes. Once those changes are made, then a new "Intrinsic Stock Value" can be determined based on your inputs. It is your job as an analyst to make sure that the input variables make sense and are reasonable. Only then can you justify the estimated intrinsic value of the stock.