Thanks Tom! I downloaded the template. For the '1 year free cash flow' section, i am looking at a company that has a annual free cash flow of 665 million. You have put apples FCF (in your example) in the billions. What is the correct way to enter the million amount so that it aligns with all of the calculation principles correctly? Where do I put the decimal point? Thanks!
Bobo Fet $0.665b will do it. Might just want to edit excel to show a few more decimal points so it’s not just rounding to the nearest billion with your answer
@@InvestingwithTom Hi Tom, from the UK and looking at some UK LSE stock exchange companies - does this only support certain stock exchanges. Does this not work with, for example, LSE?????
Mate, I’ve been looking for how to calc intrinsic value for months, you described it in the most sensible way in just 15min, big cheers from down under! PS: the spreadsheet is icing on the cake 👍
Mate, I have got a big job now. Your explanation is extremely clear and easy to follow compared to others I have seen. With regards to long term debt, our friend Mr Town suggests free cash flow should be able to pay back debt in 3 years. Thats a good rule of thumb in my opinion. Thanks again.
Thank you for the video. Could you wrap it all together and show how the intrinsic value of a company, the goal price that we would buy at, and how the current stock price and goal stock price compare to that?
Thank you for watching do not forget to hit the subscribe button.! For more guidance on how to make profits from crypto hit me up or *WhatsApp* +1 424-781-7935
This is actually the simplest explanation I came across and I think this is all we need to get an idea how much a company is worth. I'm really glad you gave the spreadsheet tool. Thanks a lot
Much clearer and easier to understand than any other method I’ve found and still looks to be conservative, doable and simple (relatively speaking). I think it’s a good tool in the toolbox! Thanks, good on ya!
I find that projecting conservative growth rates per quarter, let alone, 6-10 years, is a very difficult thing to do even with all the metrics out there in the open. A company can make acquisitions or stumble upon a new growth revenue generator that couldn't be predicted prior to the official announcement. A good point is that your spreadsheet can constantly change with the daily/weekly/monthly changes. Solid info Tom! That's why I love investing. Everyone has their own strategy to grow and multiply their money!
MICHAEL DERISO - 0 to Infinity that’s why we always buy with a margin of safety/deep discount! I also think that paying attention to numbers any more frequently than annually can tend to be a waste of time 😂 Unless you’re in a very new business/industry (which is hard to value in the first place) the a good or bad quarter is largely meaningless over a long term investment
Investing with Tom Exactly! I would say that a long-term investing strategy definitely reduces risk significantly. I do understand that many people prefer short-term trading because it’s a much more thrilling high. Plus, many people prefer not to have their bankroll sit and grow untouched for 10+ years. Sacrificing today for tomorrow is a difficult concept to apply with life moving along every day. YOLO. Good chat, we’ll talk again! Enjoy 😎
Hi Tom, thank you for the educational video! My question is if the formula for Enterprise Value is (Market Cap + Total Debt - Current Cash), why did you suddenly exclude the total debt and current cash in your Enterprise Value calculation, and just used the Present Value of Future Cash Flow?
To your first tab , i added a row for current market value and then a row for the Margin of Safety. So i subtracted intrinsic value from market value and put that over market value. Positive % result is good and i guess i would look for 20% or more. Result comes to 14% but that is based on current market value and a 10% disc rate, not market val at time you did this. I like to see that margin o safety.
Hi. Thanks a lot for this. Regarding your other vid and spreadsheet, are you saying that this video’s analysis and spreadsheet supersedes your precious one or....? As a beginner with a small fund to invest, I’m just wondering when you might use one or the other, if the earlier one is still relevant. Thanks again
Where did the 752 in G15 come from? In the video you said it was a “cash flow event” and it seems to have something to do with the terminal value but I didn’t hear an explanation for it. Also, as others have pointed out, if “Year 1” is this current year then is shouldn’t be discounted, right? Finally, how can you use either of these formulas to come up with a share price? Thanks for the video!
One question: If in the Pabrai method you add the cash on the balance sheet, why don't you also subtract the debt and get the net "cash-debt" value on the balance sheet?
Tom, another great video. Can you also make another video about systems that value investors use? It can be the website they research, or the tools they use, note taking techniques, interview techniques, etc. Thanks again Tom for your valuable videos!
Can we get an updated video on how u calculate the intrinsic value currently & if u have changed ur strategy or sumthing ? That would b great Tom thanx in advance
Thanks so much for the insight on looking at enterprise value instead of market cap for companies with a lot of debt. Where did you find/come up with that idea?
MR.Twentysix take a look at the balance sheet and lemme ask u if u use Instagram still? WhatsApp? Facebook? But simply looking at how efficient the company is and how much cash they have, top 5 in balance sheets in the world. EASILY. Don’t get caught up in short term news. What stocks do U hold right now
great video, man! but can you please upload a spreadsheet that includes the excess capital cash also...because in the video it has it but the downloadable does not
Probably doesn't help you now after the fact, but in the Excel spreadsheet file, you actually have to select 'Pabrai DCF' on the bottom left corner to reveal 'Excess Capital'
For Cash some poeple only take Cash And Cash Equivalents but not Other Short Term Investmentments. Ford you think it would have been good idea if in PV Cash Flow+Cash-Debt (Short Term+Long Term) and get Equity Value.
Hey Tom, I’m 17 I’m learning investing long term in a bit of detail, I’ve learned the basics and I have four rule 1: Number one Risk is Debt 2: must not have volatile earnings so you can predict future earnings 3: Must have long term prospects 4: Must be undervalued. And I need to find the intrinsic to do rule 4, is this way defo a good way to work it out, and how much success have you had with this way?
Hi Tom. Thanks for that video. It's very instructive. This is just one aspect of value investing and, even though I read a few books about it, I get confused in the trillion of information out there and I would love it if you could comment or make a video about the other steps you take before to decide to buy a stock. Thanks again
Thank you for sharing your knowledge. I do have a question: We assume we want to make a 10% return, however, we, as the investor, aren't actually receiving any money back from Apple during the ten years. Our money is sitting in the stock as it hopefully appreciates. So when you say earn a 10% return, are you betting on the appreciation of the stock (whether through retained earnings growing or price increasing) because we aren't actually receiving a preferred return every year like in a real estate deal. Could you elaborate on that?
@@InvestingwithTom How is Dhandho different from The Intelligent Investor reading wise? I am reading the latter one and this style of English is killing me. Although, English is not my mother tongue. Thanks for the spreadsheet. Really appreciate.
Hi thank you for the educational video? Question. I watched you other video on How to calculate intrinsic value with Apple my question is IF Value was 145 and margin of safety 72, What are the chance apple go that low? If it hit that price it doesn't mind that something in its fundamentals it's really wrong and after that just keep going down? Thank you in advance!
Nice explanation - I agree that debt MUST be considered and I really like companies with negative Net Debt to Equity, in other words more cash than debt.
Hey Tom, why add back the cash according to Paprai's method? Doesn't the market cap already take that into account? Since the market is pretty efficient at pricing companies most of the time. I would think "Mr. market" would also notice that company X is holding a huge amount of cash and would already factor that into the current stock price.
Hello Tom. I have a question to you. If we are making calculation based on FCF values, why you pick up the growth rate value corresponding from EPS from yahoo finance?. It's not better to pick up the growth rate of FCF over the past 5 years and make an estimate growth value? Thanks a lot. I enjoy your videos :)
Hey Tom , You seem to focus allot on US stocks rather than the NZ market. While Its clear owning the US stock market can get you greater capital gain due to more demand it appears to drive down dividend yield long term. I currently have most of my wealth in the NZX but am interested in hedging myself in the US stock market. However looking at the current NZ market we have seen seen increases in % capital growth and lower stock prices overall meaning we can own more stock (which eases access to entry compared to amazon trading at over 2k) So given this can you explain what are the benefits and disadvantages to investing in the NZX or US stockmarket? As an accountant i see an obvious advantage in our tax system with no capital gains and dividend tax already paid for. I feel like im missing something.... thanks
Thanks for watching! Couple of things: -Not sure I agree with your logic on greater capital gain in either market. Long term, it’s growth of businesses rather than investor demand which will determine results -I basically agree with you on the tax side of things. If I could find companies in NZ or exempt companies in Aus that fit my criteria I’d be all over them. I just haven’t been able to find much, and I think the tax differences should be more than accounted for by the investment results (but time will tell!). I’d love to be more invested in this part of the world
Hey Tom, First of all, I absolutely love your videos! Your financial calculations are crisp and easy to understand. I'm in university and very new to the whole investing game, and plan on investing for the first time within the next month, once stock prices fall low enough. What I cant understand is this- why do you only include 10 years of the business' future cash flows? It's not as if apple will stop producing cash flows after 10 years? And since our entire method of analysis hinges upon the present value of future cash flows to determine the ideal stock price, why don't we include the cash flows from the 11th, 12th or even up till 100 years?
Arnav Agarwal thank you! You could for sure, but the terminal value (second cash inflow in year 10 in this example) is intended to capture the intrinsic value of cash flows after year 10. It’s very difficult to predict would be the shorter answer, although what you’re describing is technically correct if you’re to own a business for its entire lifetime
Probably doesn't help you now after the fact, but in the Excel spreadsheet file, you actually have to select 'Pabrai DCF' on the bottom left corner to reveal 'Excess Capital'
Anyone that is confused with the PV calculation, the formula is 1/(1+10) to the power of how many years etc. E.g. 1 = cash flow / (1+10percent) to the power of how many years
Thanks. This was really informative. There is a lot of material on how to invest. But not much is available on how to exit. If we buy based on all this calculation, but for some unforseen reason the stock starts degrading... How do I know that it is not temporary and it's time I get out?
great video... question, how do you calculate intrinsic value of a company that is in its beginning years so numbers don't look that great yet but the company has great potential
I love all this math, but is it realistic to get apple for the price you are targeting. When do you set aside your evaluation and buy at a higher price because it is a great company
@shubhashish sharma UBER has a negative cash flow of -660,000 as it is still trying to make itself profitable. This also goes for newer and growing companies as well.
@shubhashish sharma Yeah, it doesn't make sense here, in that case you would be valuing their intangible assets, finding value of an idea or the business model. Kind of hard to put that together under an equation or calculation.
You calculate everything just the same except you make sure the cash flow numbers are negative. Then add up all the numbers just as usual. Unless you have a future projected numbers where they make major profits to offset all the losses, you may get a very low or negative intrinsic value which means the company is worthless. Basically you have to predict the future with some tremendous earnings, which is gambling/speculating at this point. This is why Warren Buffett doesn't take part in IPO's and untested companies because you can't calculate intrinsic value. It's a guessing game at this point.
Thanks for the video Tom! However our stocks in Vietnam don't have a platform that shown "Grown estimate in future", can you please show how can I calculate that percentage?
Hi Tom thanks for both analysis, we investors really appreciate this information. I was wondering if you had a chance to look at a small book called The Buffett System, inside they use a formula to calculate the Intrinsic Value that is very similar to your previous video, the main difference is that they take into account dividend payments. Do you think this is something that should be taken into account? Thanks again!
Video is very informative. I have a question on growth rate. In case i dont get growth rate on yahoo finance for a company how do I measure it myself? Should it be CAGR of net profits of last 3/5 years or should i consider avg growth rate?
Hi Tom. Thanks for this video. It was very well explained. I'm having trouble downloading the spreadsheet to try out the process. After I save it and open it I just get a whole heap of videos etc popping up in the excel spreadsheet and the calculator has disappeared. Any ideas or is this calculator available elsewhere? Thanks
what are your views on this. As warren buffet says it better to buy good bussiness at fair prices may be like 10 to 20percent discount from intrinsic value. than fair bussines at cheap prices like 50percent discount. like if lets say apple drops like 20percent of the cmp would it be a good buy then considering its an fantastic bussines.
Mean haka brother. Rep the kiwis. Have subbed. 1) Do you find nz investing competitive to other markets such as us? 2) when reading from script at the start, is it possible to get it above the camera? Puts me off a little seeing your eyes the side but not a biggy bro. Aroha nui
Hello Tom, great stuff!!! I downloaded the calculator and was trying to input the info for AAL but, first, I could get a growth rate for the next five years, and and that was negative 45%. Yahoo Finance only shows next Qtr. and YR. Second, it's negative. How can you value this company? Thanks, Jose
Most traders are searching for that elusive method where they never lose or can win eight or nine trades out of 10, amassing huge profits in a short amount of time with no risk, but there isn't any shortcuts to avert risks in trading, they are ever present
Trading is like anything in this life..if you go unprepared, you will be burnt. only a few have turned $1,000 into hundreds of thousands. Most people will not.
@@rolandyizel it’s best you try out what works for you, understand it and stick to it. Trading is mentally tasking, you should probably get an expert to help with more profitable trades. It’s easier that way
@@arnoldlombardi Actually I’ve been considering getting an expert to help with my trades but it’s hard to get someone genuine and profitable these days
Loved the detailed video!!! What if the growth is negative, how will it be adjusted. I looked up Ford and currently yahoo estimates it to be -19%. Can you share some insights on that?
Sorry to bombard you with question this morning but what would you say is the difference between that formula from Monhish Pabrai and the intrinsic value formula from Ben Graham? The one you present today take into account the return I expect to get from a stock while Graham's formula doesn't. Otherwise I dont know. I used both for tsx:bam.a and got two very different number (118 with your formula vs 310 with Ben's formula). Bam.a is at 43$ right now so it's a bargain according to both formula but still, with such different in results, it might not be as easy with other stock I test.
Hey Tom I love your content , I was wondering what was your formulas to generate the PV . compared to your first video of I could duplicate and understand but my numbers are not matching
Hi Tom. Thanks for a great video. I presume that if the Excess Cap is in the hundreds of millions rather than billions I would place 0. before the figure I enter?
Can you please do another example with a small business, whenever i try this with companies i actually want to invest in it just doesnt seem to work out for me
Hey Tom very nice vid! Quick question if under analysis the growth rate for the next 5 years of a stock is N/A, what do I use to calculate the IV instead? Thanks.
![Jack Harlow - Hello Miss Johnson [Official Music Video]](http://i.ytimg.com/vi/Q86_nlRoIGw/mqdefault.jpg)
Hope you all enjoy the video!
Download the spreadsheet template below:
bit.ly/2uXVSKC
So what do you this is ford is going to get bankrupt .
prathamesh satardekar not necessarily, but I think it needs to be considered in valuation
Thanks Tom! I downloaded the template. For the '1 year free cash flow' section, i am looking at a company that has a annual free cash flow of 665 million. You have put apples FCF (in your example) in the billions. What is the correct way to enter the million amount so that it aligns with all of the calculation principles correctly? Where do I put the decimal point? Thanks!
Bobo Fet $0.665b will do it. Might just want to edit excel to show a few more decimal points so it’s not just rounding to the nearest billion with your answer
@@InvestingwithTom Hi Tom, from the UK and looking at some UK LSE stock exchange companies - does this only support certain stock exchanges. Does this not work with, for example, LSE?????
This is the most usable and simplest explanation I could find on the internet.
thank you!
@@InvestingwithTom Hey I’m very new in stocks.
How can I find intrinsic value in terms of per share from this calculation?
Mate, I’ve been looking for how to calc intrinsic value for months, you described it in the most sensible way in just 15min, big cheers from down under!
PS: the spreadsheet is icing on the cake 👍
Just want to say thank you for this and your other intrinsic value video, it’s fantastic and helped a lot
Riain Morrison appreciate it. Thanks a lot for watching
Bro you explained this better than all my university textbooks. Thanks.
Mate, I have got a big job now. Your explanation is extremely clear and easy to follow compared to others I have seen. With regards to long term debt, our friend Mr Town suggests free cash flow should be able to pay back debt in 3 years. Thats a good rule of thumb in my opinion. Thanks again.
henry michal no problem thanks for watching!
This Excel sheet is amazing! It makes valuing companies so much easier. Another great tool to add to the arsenal.
Hi Corey, could you share with me what other tools you use out of your arsenal? I would like to learn from it
Thank you for the video. Could you wrap it all together and show how the intrinsic value of a company, the goal price that we would buy at, and how the current stock price and goal stock price compare to that?
Great tutorial. i tried this on Intel, if the inputs are right it shows it's at a good price
How the result?
This is an exceptionally well communicated presentation. Clear, concise and accurate. Well done.
Thank you for watching do not forget to hit the subscribe button.!
For more guidance on how to make profits from crypto hit me up or *WhatsApp*
+1 424-781-7935
This is actually the simplest explanation I came across and I think this is all we need to get an idea how much a company is worth.
I'm really glad you gave the spreadsheet tool. Thanks a lot
Glad it was helpful!
Much clearer and easier to understand than any other method I’ve found and still looks to be conservative, doable and simple (relatively speaking). I think it’s a good tool in the toolbox! Thanks, good on ya!
This was amazing, appreciate it! And Pabrai is one of my favorite investors too.
Thanks Tom, this is a lot easier to follow than most DCF videos. Ill have to add Pabrai’s book to the bookshelf!
Angus McKay glad to hear man! Just finished reading it for the second time 😂
I find that projecting conservative growth rates per quarter, let alone, 6-10 years, is a very difficult thing to do even with all the metrics out there in the open. A company can make acquisitions or stumble upon a new growth revenue generator that couldn't be predicted prior to the official announcement. A good point is that your spreadsheet can constantly change with the daily/weekly/monthly changes. Solid info Tom! That's why I love investing. Everyone has their own strategy to grow and multiply their money!
MICHAEL DERISO - 0 to Infinity that’s why we always buy with a margin of safety/deep discount! I also think that paying attention to numbers any more frequently than annually can tend to be a waste of time 😂 Unless you’re in a very new business/industry (which is hard to value in the first place) the a good or bad quarter is largely meaningless over a long term investment
Investing with Tom Exactly! I would say that a long-term investing strategy definitely reduces risk significantly. I do understand that many people prefer short-term trading because it’s a much more thrilling high. Plus, many people prefer not to have their bankroll sit and grow untouched for 10+ years. Sacrificing today for tomorrow is a difficult concept to apply with life moving along every day. YOLO. Good chat, we’ll talk again! Enjoy 😎
Hi Tom, thank you for the educational video! My question is if the formula for Enterprise Value is (Market Cap + Total Debt - Current Cash), why did you suddenly exclude the total debt and current cash in your Enterprise Value calculation, and just used the Present Value of Future Cash Flow?
SAME QUESTION
The excess capital was also excluded so I think it has sumthing to do with that
To your first tab , i added a row for current market value and then a row for the Margin of Safety. So i subtracted intrinsic value from market value and put that over market value. Positive % result is good and i guess i would look for 20% or more. Result comes to 14% but that is based on current market value and a 10% disc rate, not market val at time you did this. I like to see that margin o safety.
Hi. Thanks a lot for this. Regarding your other vid and spreadsheet, are you saying that this video’s analysis and spreadsheet supersedes your precious one or....? As a beginner with a small fund to invest, I’m just wondering when you might use one or the other, if the earlier one is still relevant. Thanks again
Where did the 752 in G15 come from? In the video you said it was a “cash flow event” and it seems to have something to do with the terminal value but I didn’t hear an explanation for it.
Also, as others have pointed out, if “Year 1” is this current year then is shouldn’t be discounted, right?
Finally, how can you use either of these formulas to come up with a share price?
Thanks for the video!
Thanks for this. One of most helpful videos I have seen so far
Tom, thank you very much for doing this. It's very clean and straightforward, which I appreciate. Keep up the good work!
Ted Daigle thank you!
The Intrinsic Value of This Video is very high, big thank.
One question: If in the Pabrai method you add the cash on the balance sheet, why don't you also subtract the debt and get the net "cash-debt" value on the balance sheet?
Great video, thank you Tom. could you pls share how to deal with negative cash flow in a DCF? thank you.
Tom, another great video. Can you also make another video about systems that value investors use? It can be the website they research, or the tools they use, note taking techniques, interview techniques, etc. Thanks again Tom for your valuable videos!
Can we get an updated video on how u calculate the intrinsic value currently & if u have changed ur strategy or sumthing ? That would b great Tom thanx in advance
Great video! How do you decide which intrinsic value calculator to use? Phil Town or DCF?
Great video with added and subtle lessons from SRG
Thanks for the nice video. Why not just use Enterprise Value all the time? Why ever use the 1st method instead of the 2nd?
I’m just now finding this video but it is super helpful. Thank you so much!
Thanks so much for the insight on looking at enterprise value instead of market cap for companies with a lot of debt. Where did you find/come up with that idea?
this saves so much time. you the best Tom. I think FB is already undervalued in my calculations at least.
Great pick
MR.Twentysix take a look at the balance sheet and lemme ask u if u use Instagram still? WhatsApp? Facebook? But simply looking at how efficient the company is and how much cash they have, top 5 in balance sheets in the world. EASILY. Don’t get caught up in short term news. What stocks do U hold right now
great video, man! but can you please upload a spreadsheet that includes the excess capital cash also...because in the video it has it but the downloadable does not
Probably doesn't help you now after the fact, but in the Excel spreadsheet file, you actually have to select 'Pabrai DCF' on the bottom left corner to reveal 'Excess Capital'
I’m not a native speaker and your accent is incredibly strange to me , but easy to understand and your explanation is great!
New Zealander!
I did this for Tesla. Wow! Thanks for the simple, straight forward example.
What was the price?
Per share obviously. Ta
Where do you add in dividends?
Also, what’s the formula for an inconsistent earnings stock like “T”?
Thanks a lot tom for the spread sheet. Wish you all the best from across the ditch.
Great video, should we be using the TTM number for FCF, or the previous year?
Good stuff bro. Nice to see a fellow Kiwi creating content.
If I am just looking at growth rate for 1-5 years how will i adjust the formula and changes does it make?
Thanks btw great vid!
For Cash some poeple only take Cash And Cash Equivalents but not Other Short Term Investmentments.
Ford you think it would have been good idea if in PV Cash Flow+Cash-Debt (Short Term+Long Term) and get Equity Value.
Love your videos and your ability to simplify complex concepts in a way that anyone would understand. Kudos!
Hey Tom, I’m 17 I’m learning investing long term in a bit of detail, I’ve learned the basics and I have four rule 1: Number one Risk is Debt 2: must not have volatile earnings so you can predict future earnings 3: Must have long term prospects 4: Must be undervalued. And I need to find the intrinsic to do rule 4, is this way defo a good way to work it out, and how much success have you had with this way?
my guys fried lmao
Hi Tom. Thanks for that video. It's very instructive. This is just one aspect of value investing and, even though I read a few books about it, I get confused in the trillion of information out there and I would love it if you could comment or make a video about the other steps you take before to decide to buy a stock. Thanks again
Hello Tom, Thank you for your video. How did you determine the terminal value of being 15 ?
Thank you for sharing your knowledge. I do have a question:
We assume we want to make a 10% return, however, we, as the investor, aren't actually receiving any money back from Apple during the ten years. Our money is sitting in the stock as it hopefully appreciates. So when you say earn a 10% return, are you betting on the appreciation of the stock (whether through retained earnings growing or price increasing) because we aren't actually receiving a preferred return every year like in a real estate deal. Could you elaborate on that?
I believe the 10% return is that the investor requires a minimum of a 10% increase on the stock.
I've got Dhandho sitting on the shelf, just need to get around to reading it.
Love your work mate! 👏
Joshua Williams nice one, I actually just finished it for the second time 😂
@@InvestingwithTom How is Dhandho different from The Intelligent Investor reading wise? I am reading the latter one and this style of English is killing me. Although, English is not my mother tongue. Thanks for the spreadsheet. Really appreciate.
Rihards Grebuns Dhandho is a MUCH easier read honestly
Hi thank you for the educational video?
Question. I watched you other video on How to calculate intrinsic value with Apple my question is IF Value was 145 and margin of safety 72, What are the chance apple go that low? If it hit that price it doesn't mind that something in its fundamentals it's really wrong and after that just keep going down? Thank you in advance!
thanks for doing this. appreciate the work and your generous sharing.
Nice explanation - I agree that debt MUST be considered and I really like companies with negative Net Debt to Equity, in other words more cash than debt.
INVEST for the future I like it!
Just subscribed Tom. Found you via Aussie Wealth Creation.
So happy to be finding Aussie and Kiwi Phil Town fans.
(I'm an Aussie)
Brad Jones thanks for coming across!
Hey Tom, why add back the cash according to Paprai's method? Doesn't the market cap already take that into account? Since the market is pretty efficient at pricing companies most of the time. I would think "Mr. market" would also notice that company X is holding a huge amount of cash and would already factor that into the current stock price.
Thanks Tom! Really useful video!
Hello Tom. I have a question to you. If we are making calculation based on FCF values, why you pick up the growth rate value corresponding from EPS from yahoo finance?. It's not better to pick up the growth rate of FCF over the past 5 years and make an estimate growth value?
Thanks a lot. I enjoy your videos :)
Hey Tom , You seem to focus allot on US stocks rather than the NZ market. While Its clear owning the US stock market can get you greater capital gain due to more demand it appears to drive down dividend yield long term. I currently have most of my wealth in the NZX but am interested in hedging myself in the US stock market. However looking at the current NZ market we have seen seen increases in % capital growth and lower stock prices overall meaning we can own more stock (which eases access to entry compared to amazon trading at over 2k) So given this can you explain what are the benefits and disadvantages to investing in the NZX or US stockmarket? As an accountant i see an obvious advantage in our tax system with no capital gains and dividend tax already paid for. I feel like im missing something.... thanks
Thanks for watching! Couple of things:
-Not sure I agree with your logic on greater capital gain in either market. Long term, it’s growth of businesses rather than investor demand which will determine results
-I basically agree with you on the tax side of things. If I could find companies in NZ or exempt companies in Aus that fit my criteria I’d be all over them. I just haven’t been able to find much, and I think the tax differences should be more than accounted for by the investment results (but time will tell!). I’d love to be more invested in this part of the world
Hey Tom,
First of all, I absolutely love your videos! Your financial calculations are crisp and easy to understand. I'm in university and very new to the whole investing game, and plan on investing for the first time within the next month, once stock prices fall low enough.
What I cant understand is this- why do you only include 10 years of the business' future cash flows? It's not as if apple will stop producing cash flows after 10 years? And since our entire method of analysis hinges upon the present value of future cash flows to determine the ideal stock price, why don't we include the cash flows from the 11th, 12th or even up till 100 years?
Arnav Agarwal thank you! You could for sure, but the terminal value (second cash inflow in year 10 in this example) is intended to capture the intrinsic value of cash flows after year 10. It’s very difficult to predict would be the shorter answer, although what you’re describing is technically correct if you’re to own a business for its entire lifetime
@@InvestingwithTom Thank you so much for your prompt response! Cheers.
Arnav Agarwal no worries. Thanks for watching 🙂
Thanks Tom, I from Perú and appreciate your videos.. a big hugs
THe spreadsheet you link to is missing the column for excess capital ??
Probably doesn't help you now after the fact, but in the Excel spreadsheet file, you actually have to select 'Pabrai DCF' on the bottom left corner to reveal 'Excess Capital'
Anyone that is confused with the PV calculation, the formula is 1/(1+10) to the power of how many years etc. E.g. 1 = cash flow / (1+10percent) to the power of how many years
Brilliant Tom. I am a fellow kiwi as well. All the best to you.
Thanks for sharing. What is the period over which you take the discount rate? 10 years?
Thanks for the video. How do you calculate Enterprise Value if it's a bank? Or is it a different approach you follow for Banking sector?
Thanks man. Wouldn't it be better to use an average of last 5 or 10 years of cash flow instead of just the last years one??
Why do you prefer this method over phil towns method? I watched both your videos.
Hi Tom, can you please send me you template on How To Calculate Intrinsic Value? Thank you.
Very nice video on DCF. Just what I was looking for. Thanks! 👍
Hey thanks a lot Tom, I study some of your videos on how to educate others about finance with my channel! I appreciate all that you do
Thank you so much for your video's. I am just wondering, how do you get the internsic value per stock out of this?
Divide market cap by number of shares
Thanks for this! I feel the way you have done it is so clean and much simpler to follow compared to other videos!
Thanks. This was really informative. There is a lot of material on how to invest. But not much is available on how to exit. If we buy based on all this calculation, but for some unforseen reason the stock starts degrading... How do I know that it is not temporary and it's time I get out?
How did you arrive at 10th year's 1950 value?
Very nice video! Thanks for the spreadsheet... I have searched a lot for one..
M C happy to help 🙂
great video... question, how do you calculate intrinsic value of a company that is in its beginning years so numbers don't look that great yet but the company has great potential
Do you know what the intrinsic cost per share is now? What about the split?
I love all this math, but is it realistic to get apple for the price you are targeting. When do you set aside your evaluation and buy at a higher price because it is a great company
Hi, when used for companies with projected negative growth rates/ negative FCF, how do you then calculate the intrinsic value?
I'd love to know as well.
Ye, an answer to this would be much appreciated.
@shubhashish sharma UBER has a negative cash flow of -660,000 as it is still trying to make itself profitable. This also goes for newer and growing companies as well.
@shubhashish sharma Yeah, it doesn't make sense here, in that case you would be valuing their intangible assets, finding value of an idea or the business model. Kind of hard to put that together under an equation or calculation.
You calculate everything just the same except you make sure the cash flow numbers are negative. Then add up all the numbers just as usual. Unless you have a future projected numbers where they make major profits to offset all the losses, you may get a very low or negative intrinsic value which means the company is worthless.
Basically you have to predict the future with some tremendous earnings, which is gambling/speculating at this point. This is why Warren Buffett doesn't take part in IPO's and untested companies because you can't calculate intrinsic value. It's a guessing game at this point.
Why do you prefer this over Graham's formula tho? Or you use both of them?
Would be nice to have video about the Graham formula...🙏
Thanks for the video Tom! However our stocks in Vietnam don't have a platform that shown "Grown estimate in future", can you please show how can I calculate that percentage?
Hi Tom thanks for both analysis, we investors really appreciate this information. I was wondering if you had a chance to look at a small book called The Buffett System, inside they use a formula to calculate the Intrinsic Value that is very similar to your previous video, the main difference is that they take into account dividend payments. Do you think this is something that should be taken into account? Thanks again!
Jose M. Yes actually, I think it’s the main thing missing
Hey! Great video but I had a doubt...what do we do if the company's free cash flow is negative?
Hi Tom! Great job once again. Thx for the spreadsheet. This is super helpful for us value investors!
Video is very informative. I have a question on growth rate. In case i dont get growth rate on yahoo finance for a company how do I measure it myself? Should it be CAGR of net profits of last 3/5 years or should i consider avg growth rate?
Hi Tom. Thanks for this video. It was very well explained. I'm having trouble downloading the spreadsheet to try out the process. After I save it and open it I just get a whole heap of videos etc popping up in the excel spreadsheet and the calculator has disappeared. Any ideas or is this calculator available elsewhere? Thanks
what are your views on this.
As warren buffet says it better to buy good bussiness at fair prices may be like 10 to 20percent discount from intrinsic value.
than fair bussines at cheap prices like 50percent discount.
like if lets say apple drops like 20percent of the cmp would it be a good buy then considering its an fantastic bussines.
“Good business” is captured through the future growth aspect here, than a poor business wouldn’t have 🙂
In Yahoo Finance, what is the growth rate for ? growth rate for revenue? or net profit or free cash flow ?
Mean haka brother. Rep the kiwis. Have subbed. 1) Do you find nz investing competitive to other markets such as us? 2) when reading from script at the start, is it possible to get it above the camera? Puts me off a little seeing your eyes the side but not a biggy bro. Aroha nui
Thanks Tom, Can you also explain to compare results of DSF with PEG ratio P/CF and PE ratio to double check our result.
2:36 start. you are welcome
Hi Tom, what about Rule 1 method by Phil town, are you going to show it as well?
Hello Tom, great stuff!!! I downloaded the calculator and was trying to input the info for AAL but, first, I could get a growth rate for the next five years, and and that was negative 45%. Yahoo Finance only shows next Qtr. and YR. Second, it's negative. How can you value this company? Thanks, Jose
Most traders are searching for that elusive method where they never lose or can win eight or nine trades out of 10, amassing huge profits in a short amount of time with no risk, but there isn't any shortcuts to avert risks in trading, they are ever present
successful trading takes time. There is always a risk, and it needs to be defined and controlled.
Trading is like anything in this life..if you go unprepared, you will be burnt. only a few have turned $1,000 into hundreds of thousands. Most people will not.
The things is some strategies are extremely hard to understand and it’s not really easy to incorporate into my trading plan, it’s really exhausting
@@rolandyizel
it’s best you try out what works for you, understand it and stick to it. Trading is mentally tasking, you should probably get an expert to help with more profitable trades. It’s easier that way
@@arnoldlombardi Actually I’ve been considering getting an expert to help with my trades but it’s hard to get someone genuine and profitable these days
Loved the detailed video!!! What if the growth is negative, how will it be adjusted. I looked up Ford and currently yahoo estimates it to be -19%. Can you share some insights on that?
Hi Tom, really enjoying your channel. Quick question, what do you find to be the best resource for NZ company data?
Sorry to bombard you with question this morning but what would you say is the difference between that formula from Monhish Pabrai and the intrinsic value formula from Ben Graham? The one you present today take into account the return I expect to get from a stock while Graham's formula doesn't. Otherwise I dont know. I used both for tsx:bam.a and got two very different number (118 with your formula vs 310 with Ben's formula). Bam.a is at 43$ right now so it's a bargain according to both formula but still, with such different in results, it might not be as easy with other stock I test.
What are the growth rate in this method? Revenue growth? Earnings per share growth rate? Cash flow growth rate?... Thanks.
Hey Tom I love your content , I was wondering what was your formulas to generate the PV . compared to your first video of I could duplicate and understand but my numbers are not matching
It would be a good time to make a bunch of these videos again since everything is on sale imo.
Mate - does your very nice spreadsheet follow the formulas in Phil Town’s Rule #1 book?
Hi Tom. Thanks for a great video. I presume that if the Excess Cap is in the hundreds of millions rather than billions I would place 0. before the figure I enter?
Can you please do another example with a small business, whenever i try this with companies i actually want to invest in it just doesnt seem to work out for me
Hey Tom very nice vid! Quick question if under analysis the growth rate for the next 5 years of a stock is N/A, what do I use to calculate the IV instead? Thanks.