Enjoyed this video? Then please subscribe to the channel, and watch the sequel called "DCF Excel model" that focuses specifically on the process of building a discounted cash flow model in Excel ruclips.net/video/TfpXPILP4ME/видео.html
Hello Adrian! I hope you will enjoy the video. It's about 15 minutes on the various parameters in a DCF, as well as simple "shortcuts" on how to get some initial values. And then the remaining ~30 minutes is on building a DCF model in Excel from scratch, including the inevitable stumbling blocks you might run into. Would love to hear what you think of the full video!
Good to hear from you again! I simply can't get enough of going through cash flow statements, they provide so much valuable information: ruclips.net/video/mZBjsIYrLvM/видео.html&pp=gAQBiAQB
@@TheFinanceStoryteller will watch that. Based off guidance (that's what I am also doing) and we can project it, but now I can clearly see "could" is the right word you've you used at the very beginning of it :) thanks
Yeah, there's a lot of information in there. You might also try the follow-up video dealing mostly with the Excel formulas and calculations: ruclips.net/video/TfpXPILP4ME/видео.html&pp=gAQBiAQB
Yes, this certainly builds on a lot of other financial knowledge. Have a look first at some of my income statement and balance sheet tutorials in the "real world case studies" playlist to familiarize yourself with some of the terminology: ruclips.net/video/J_1F8GoLOI8/видео.html&pp=gAQBiAQB My videos on free cash flow might also help, as this is the core concept of any DCF analysis: ruclips.net/video/gl3OLtEX2PM/видео.html&pp=gAQBiAQB
Done - very Interesting to see all diverse methods, also always appreciate your capacity to keep it simple and sharing of lot of rules of thumb that I promote too. Btw, any M&A video to suggest?
Wonderful to hear that. 😊 Here's the link to my playlist on M&A, it includes videos on M&A, goodwill, due diligence, noncontrolling interest, etc: ruclips.net/video/BAFmgPXvlJ8/видео.html&pp=gAQBiAQB
Thanks for the kind words! Have you watched the sequel to this video as well? It focuses more on the calculation aspects in Excel, using the same real world case study: ruclips.net/video/TfpXPILP4ME/видео.html&pp=gAQBiAQB
Great Video, you make a great job by explaining the Discounted Cash Flow method. There's something that bothers me though, the Idea of a terminal value that incorporates a perpetual rate of growth probably has a very low happenstance in real life. Instead of using that what do you think of multiplying the projected earnings by a factor of 10-15, like a future PE. What do you think of that?
Hello Felipe, it's Philip here. 😊 Thank you for the kind words about the video. Yes, the idea of terminal value makes me uncomfortable as well (forever is a very very long time), especially when at a low WACC it amounts to such a large part of the total value. You could indeed go for a multiple approach, but it's probably better to use EBITDA than earnings in that case, in order to stay as close as possible to a cash flow driven metric. And remember that dividing by X versus multiplying by a factor of Y are complementary. Dividing by 0.05 is the same as multiplying by 20. Dividing by 0.07 is the same as multiplying by (approximately) 14.3.
@@TheFinanceStoryteller Thanks you once again for such an amazing explanation. I also discovered your twitter account and I'm following you there too. One follow up question if I may... Charlie Munger always warned us against the use of EBITDA. would it be more recomendable to use Free cash flow as the number to be multiplied?
Hello again! I personally always check Gross Margin % (Gross Profit $ as % of Revenue $) and Operating Income % first when I analyze a company to get an idea of the "geography" of the profit and loss statement. I am not necessarily opposed to reviewing EBITDA (or using it in "multiple" calculations), there could actually be very good reasons to compare different companies in an industry on the EBITA or EBITDA level ruclips.net/video/nImp51zYcy4/видео.html&pp=gAQBiAQB Where it gets tricky is when companies use terms like "Adjusted EBITDA" (or even more exotic than that), especially if the number of line items and the $ value of the adjustments from EBITDA to Adjusted EBITDA are sizeable (and in some cases somewhat arbitrary). Have a look at my discussion of GAAP vs non-GAAP metrics: ruclips.net/video/ewzlgnGtfmg/видео.html and this part of my "What is an IPO" video: ruclips.net/video/4t62BEH9Ajs/видео.html Yes, I think free cash flow is a good metric to use as input for your valuation, just like EBITDA it excludes the effect of depreciation and amortization (in the free cash flow calculation, this is one of the lines that is added back when going from net income to CFOA), but its advantage is that free cash flow incorporates the effect of changes in working capital (which EBITDA does not) as well as capital expenditures (which EBITDA does not). However, be careful, as free cash flow is a non-GAAP metric and some companies take poetic liberties in coming up with their own special definition: ruclips.net/video/gl3OLtEX2PM/видео.html As Buffett says/does: read that annual report in detail, before you put your money into it!!!! ;-) Feel free to send me a connection request on Linked In as well, I am pretty active there. Tried to find you, but there are several people with the same name as you....
Yeah, I am very interested in understanding companies. In my video "What is an ETF", I disclose my personal investment portfolio: ruclips.net/video/GBLNKbOgQ4w/видео.html
Yep, it's been going up and down pretty much between $39 and $42 in recent months. Q1 actual free cash flow was in line with what I expected, let's see how the rest of the year comes out. Big unknown is still the interest rates, which is a very significant factor for Verizon.
Telecom in the US seems to be a business with good margins. For Verizon, with Gross Margin of 59% of revenue, minus SG&A at 22-23% of revenue, minus depreciation and amortization, minus goodwill impairment (2023 only), that equates to Operating Margin at 22-23% of revenue.
I didn't really calculate it, but have instead estimated it. In my estimates for the DCF Excel model, I put revenue growth at 3% to start with (for 2024 through 2026), and then slowing to 2% growth per year (2027 and 2028). I expect CFOA and Free Cash Flow to grow at similar rates. 2% growth also seems to be reasonably in line with the long term expected growth of the US economy, which is the primary market that Verizon operates in.
Yep, it has pretty much been moving "sideways" for the past couple of months. I am still holding on to my shares, as I am optimistic of Verizon's future.
![Jack Harlow - Hello Miss Johnson [Official Music Video]](http://i.ytimg.com/vi/Q86_nlRoIGw/mqdefault.jpg)
Enjoyed this video? Then please subscribe to the channel, and watch the sequel called "DCF Excel model" that focuses specifically on the process of building a discounted cash flow model in Excel ruclips.net/video/TfpXPILP4ME/видео.html
This is incredible
Thank you. 😊😊😊😊
The financialstoryteller...... A walking legend !!
😂😂😂😎😎😎 Thank you!!!
Definitely added this to my watch later section. I've seen other youtubers do this, but never 48min worth
Hello Adrian! I hope you will enjoy the video. It's about 15 minutes on the various parameters in a DCF, as well as simple "shortcuts" on how to get some initial values. And then the remaining ~30 minutes is on building a DCF model in Excel from scratch, including the inevitable stumbling blocks you might run into. Would love to hear what you think of the full video!
@@TheFinanceStorytellerthat's the way I'm doing it now, great video, thanks!
Omg you even put proper subtitles for this amazing video!
I liked the part of cash flow. I've read the whole book on cash flow, but now kinda see what's up. Thanks!
Good to hear from you again! I simply can't get enough of going through cash flow statements, they provide so much valuable information: ruclips.net/video/mZBjsIYrLvM/видео.html&pp=gAQBiAQB
@@TheFinanceStoryteller will watch that. Based off guidance (that's what I am also doing) and we can project it, but now I can clearly see "could" is the right word you've you used at the very beginning of it :) thanks
Thank you!!! I need to rewatch it again!
Yeah, there's a lot of information in there. You might also try the follow-up video dealing mostly with the Excel formulas and calculations: ruclips.net/video/TfpXPILP4ME/видео.html&pp=gAQBiAQB
never added a video to my watch later list quicker than i did for this one.
Hope you watch it soon, and enjoy it! I think it's a pretty solid one.
Second time watching this video
Thanks
Most welcome 😊 Have a look at the sequel as well, where I go into more specifics on the Excel model: ruclips.net/video/TfpXPILP4ME/видео.html
This is deep, and long, need to dedicate time to appreciate it ²⁹³
Yes, this certainly builds on a lot of other financial knowledge. Have a look first at some of my income statement and balance sheet tutorials in the "real world case studies" playlist to familiarize yourself with some of the terminology: ruclips.net/video/J_1F8GoLOI8/видео.html&pp=gAQBiAQB
My videos on free cash flow might also help, as this is the core concept of any DCF analysis: ruclips.net/video/gl3OLtEX2PM/видео.html&pp=gAQBiAQB
Thank you man, I will spend some qualitative time watching it
Enjoy watching it, Lorenzo! Look forward to hearing what you think of it.
Done - very Interesting to see all diverse methods, also always appreciate your capacity to keep it simple and sharing of lot of rules of thumb that I promote too. Btw, any M&A video to suggest?
Wonderful to hear that. 😊 Here's the link to my playlist on M&A, it includes videos on M&A, goodwill, due diligence, noncontrolling interest, etc:
ruclips.net/video/BAFmgPXvlJ8/видео.html&pp=gAQBiAQB
Ready for boom ❤ you are doing very well
Thanks for the kind words! Have you watched the sequel to this video as well? It focuses more on the calculation aspects in Excel, using the same real world case study: ruclips.net/video/TfpXPILP4ME/видео.html&pp=gAQBiAQB
Great Video, you make a great job by explaining the Discounted Cash Flow method. There's something that bothers me though, the Idea of a terminal value that incorporates a perpetual rate of growth probably has a very low happenstance in real life. Instead of using that what do you think of multiplying the projected earnings by a factor of 10-15, like a future PE. What do you think of that?
Hello Felipe, it's Philip here. 😊 Thank you for the kind words about the video. Yes, the idea of terminal value makes me uncomfortable as well (forever is a very very long time), especially when at a low WACC it amounts to such a large part of the total value. You could indeed go for a multiple approach, but it's probably better to use EBITDA than earnings in that case, in order to stay as close as possible to a cash flow driven metric. And remember that dividing by X versus multiplying by a factor of Y are complementary. Dividing by 0.05 is the same as multiplying by 20. Dividing by 0.07 is the same as multiplying by (approximately) 14.3.
@@TheFinanceStoryteller Thanks you once again for such an amazing explanation. I also discovered your twitter account and I'm following you there too. One follow up question if I may... Charlie Munger always warned us against the use of EBITDA. would it be more recomendable to use Free cash flow as the number to be multiplied?
Hello again!
I personally always check Gross Margin % (Gross Profit $ as % of Revenue $) and Operating Income % first when I analyze a company to get an idea of the "geography" of the profit and loss statement. I am not necessarily opposed to reviewing EBITDA (or using it in "multiple" calculations), there could actually be very good reasons to compare different companies in an industry on the EBITA or EBITDA level ruclips.net/video/nImp51zYcy4/видео.html&pp=gAQBiAQB
Where it gets tricky is when companies use terms like "Adjusted EBITDA" (or even more exotic than that), especially if the number of line items and the $ value of the adjustments from EBITDA to Adjusted EBITDA are sizeable (and in some cases somewhat arbitrary). Have a look at my discussion of GAAP vs non-GAAP metrics: ruclips.net/video/ewzlgnGtfmg/видео.html and this part of my "What is an IPO" video: ruclips.net/video/4t62BEH9Ajs/видео.html
Yes, I think free cash flow is a good metric to use as input for your valuation, just like EBITDA it excludes the effect of depreciation and amortization (in the free cash flow calculation, this is one of the lines that is added back when going from net income to CFOA), but its advantage is that free cash flow incorporates the effect of changes in working capital (which EBITDA does not) as well as capital expenditures (which EBITDA does not). However, be careful, as free cash flow is a non-GAAP metric and some companies take poetic liberties in coming up with their own special definition: ruclips.net/video/gl3OLtEX2PM/видео.html
As Buffett says/does: read that annual report in detail, before you put your money into it!!!! ;-)
Feel free to send me a connection request on Linked In as well, I am pretty active there. Tried to find you, but there are several people with the same name as you....
@@TheFinanceStoryteller Thank you Phillip! Much clearer now. Your channel is a gem! I sent you a linkedin request.
Hello Felipe! The Linked In request did not come through, can you check? My full name is Philip de Vroe.
Thank you!
You're welcome! Follow-up video specifically focusing on the Excel model and its formulas: ruclips.net/video/TfpXPILP4ME/видео.html&pp=gAQBiAQB
@@TheFinanceStoryteller thank u, will do. Love the content you made on fundamental analysis. :)
Yeah, I am very interested in understanding companies. In my video "What is an ETF", I disclose my personal investment portfolio: ruclips.net/video/GBLNKbOgQ4w/видео.html
Verizon share price on 17th May 2024 is US$ 40.16 Echt heel erg bedankt.
Yep, it's been going up and down pretty much between $39 and $42 in recent months. Q1 actual free cash flow was in line with what I expected, let's see how the rest of the year comes out. Big unknown is still the interest rates, which is a very significant factor for Verizon.
Thanks
Thank you! Appreciated. 🙏
Coool!!!! Thank you!
My pleasure! Happy to help.
Please, can you let me know how the Operating Income Amounted to such values?
Telecom in the US seems to be a business with good margins. For Verizon, with Gross Margin of 59% of revenue, minus SG&A at 22-23% of revenue, minus depreciation and amortization, minus goodwill impairment (2023 only), that equates to Operating Margin at 22-23% of revenue.
Please how did you calculate for the terminal value growth rate?
I didn't really calculate it, but have instead estimated it. In my estimates for the DCF Excel model, I put revenue growth at 3% to start with (for 2024 through 2026), and then slowing to 2% growth per year (2027 and 2028). I expect CFOA and Free Cash Flow to grow at similar rates. 2% growth also seems to be reasonably in line with the long term expected growth of the US economy, which is the primary market that Verizon operates in.
❤🎉
the Share price of Verizon today is 40.94%
Yep, it has pretty much been moving "sideways" for the past couple of months. I am still holding on to my shares, as I am optimistic of Verizon's future.
30:04
An important point!!! Always tie out the model with the historical data in the source documents.