How to Find Intrinsic Value of a Stock | Excel Calculator | Calculate Intrinsic Value of Infosys
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- Опубликовано: 31 май 2024
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If you're tired of the guesswork and want solid techniques to determine a stock's true worth, this video is a must-watch as I unveil three proven methods to calculate the intrinsic value of a stock.
1. The Relative Value Model compares a company's financials to its peers, using metrics like the Price-Earnings (PE) ratio. I'll show how you can find the intrinsic value of Wipro Limited using this approach
2. Discounted Cash Flow (DCF) method is a very popular way of calculating the intrinsic value and I'll be breaking down the complex DCF method into five simple steps. Using Infosys as an example, we'll learn how to project cash flows, apply discount rates and compute the present value of future earnings
3. Dividend Discount model values companies that pay dividends and it requires just three key inputs - current dividend per share, discount rate, and dividend growth rate
👉 I have also put everything discussed in this video in an excel worksheet. You can find it at docs.google.com/spreadsheets/... .. the sheet is downloadable so please feel free to modify per your convenience
👉 Video Chapters:
00:00 Finding Intrinsic Value of a Share
01:02 What is Intrinsic Value?
02:44 1. Relative Value Method
04:54 2. Discounted Cash Flow Analysis
11:05 3. Dividend Discount Model
15:31 Shankar's Viewpoint
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#intrinsicvalue #discountedcashflow #shareprice
Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links
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This guy is like an underdog RUclipsr . He makes best videos on investing but very few people know about him. Let’s make him famous. Let’s share , comment and like his videos so that he gets his due.
Glad you like my work 🙌
Let's not
Speed to be controlled
I dont think anybody can ever explain such a complicated concept in literally 17-18 mins. Kudos Shankar sir!
Thank you very much 🙌 I'm glad you found it useful & were able to relate to all the steps.
@@shankarnathawesome information sir you are doing very hardwork for us thanks 🙏🙏😊
Great content which we cannot get from other finance experts
Good to know. Thanks!
You are brilliant Shankar. In fact this is a great learning for people who are in valuation and m&a stream.
Thank you very much, Rajeev. Much appreciated! 🙌
Thank you for valuable information sir 🙏🙏🙏
Most welcome 🙌
Bhai u are a champ , was looking for this...
Great research and content is in a very easy to understand language
Thank you very much
As always, your content is awesome & simple to understand. Thankyou
My pleasure! Glad you found it useful and easy to comprehend
Excellent explanation for a Financial Dud like me..!! I have repeatedly heard it. Thank you Sir..!!
You're most welcome. Glad you like it
Just to not patronize, yet state the truth, I have been watching your videos (and taking notes) ever since you were on ETMoney..!! And a lot of my learnings are attributed to these videos. Many thanks. :D
The Best video on valuation ❤
Wow, thank you! 🙌
Your are one of the best in making such amazing videos. Thanks.
Wow, thank you! 🙌
Fantastic video. Most difficult subject exceptionally made simple. Too good to be true. Thanks ❤
My pleasure 😊 .. please do put it to use. It's a bit tough initially but once one gets used to the process, it offers a big layer of comfort before investing
I always appreciate videos primarily because it’s data driven.
Good job ✅
Thank you 🙌
Thank you very well explained & presented ❤
You’re welcome 😊
Great content & learning!
Glad to hear that! Thx!
Appreciate for your hard work.
Very informative and knowledgeable video. Learn lots of things. Thank you❤
Most welcome. I'm glad you liked it
Awesome.Will need to see it a few times more before i get a grasp.I intend practicing it,let's hope I finally do manage to work it out.Thanks.Grateful.Very educative.
Most welcome. Glad you found it informative!
Amazing Shankar. Not even my finance prof had explained this to me so clearly. Great job and this is possibly the best video on intrinsic value calculation.
Thank you, glad you liked it and found it useful
100% agree. As a PGDM (Securities Markets specialization) student , i can definitely say this was better than any proff
Supremely quality content, i never thought a stock can be valued in such a way, kudos shankar
Thanks, glad you found it informative
Thanks once again for this crisp stuff. Will try out on the stocks in my portfolio and see if I have made the buyings at right price.
Most welcome. Yes, please do .. it would give more clarity & reaffirm your investment thesis
Very nice presentation. Easy to understand
Thank you very much!
I was thinking about today’s video and got a pop-up. Thanks, as always, Shankar 😊
My pleasure!
Thanks a lot, easy to understand by the common man, great work.
Glad it helped! You're most welcome
As always, excellent video Shankar. Clear, concise and very helpful. Thank you for sharing your knowledge.
My pleasure. Thank you very much 🙌
Excellent presentation
Thanks 🙌
More conceptual video like this on investing
This is Quality.
A truly enlightening experience Sir thank you
My pleasure 🙌
Thank you for informative video
My pleasure. Glad you found it useful
This is one of the best videos of Stock valuation that i have come across. It takes Warren buffett's methodology (DCF) and puts it in a way where a layman investor like me can understand.
Thank you very much 🙌
nice video Shankar ji. I always have a little confusion in my head with respect to DCF but you explained it in a simplified manner. Thanks😀
My pleasure. Glad you found it helpful!
So important for any investor to understand this.
Thanks Shanker
My pleasure!
What an excellent vedio on Instrinsic value, Superb!
Glad it was helpful!
Excellent. Thanks for your efforts
My pleasure
Great effort. Really worth watching
Thanks a ton, glad you liked it
As always amazing sir 😁
Thank you so much 😀
Your presentation skills are top knotch❤❤❤❤❤❤❤😍👌
Thanks 🙌
Thank you so much for the amazing video buddy! Hope you would keep bringing such more content. Kudos to you!!🎉
Most welcome 🙌
Very good job sir, God bless u 🎉
Thanks a lot 🙌
An excellent session Shankar Ji. You had put things in a easy way to understand it.
Thanks a lot. Glad you liked it
Thank u Shankar nath sir ❤
Most welcome 🙌
It is very nicely presented and the content is very well defined. Thank you for this information.
You are most welcome 🙌
Thanks for valuable lesson
You are welcome
Fully loaded with information, thank you
Glad it was helpful!
Awesome presentation.
Thank you!
Excellent Sir.🙏
Thank you!
Excellant Shankarnath ji keep it up
Thanks a lot
As usual woww ! Great video Shankar , at some places sounded like listening to Einstein relativity theory .But it's so good .will try to do the same calculation for Wipro !
Thanks a ton. Please share your results (intrinsic value) on Wipro for the benefit of the larger group.
Awesome stuff to introduce someone to valuations. Please make video on reverse DCF
Thanks for the appreciation and suggestion
You earned my subscription bro..
Welcome aboard!
Hi sir! I just came across ur videos they r amazing...
Keep up the good work 🙌🙌
Thanks and welcome
Great content as usual. Will try the spreadsheet and give comments.
Awesome, thank you!
Information which 90% of so called stock advisors on youtube can never talk about. Brilliant content!!
your Intrinsic value of subscribers is definitely in Millions, The day will come!
Thank you very much for the vote of confidence, Deepak ji. I'm glad you like my work
This is the simplest and most effective explanation of DCF. In the oast I followed the EV/EBITDA, P/E and P/B models, especially the first one. Never tried the DCF as I felt it too complicated. I agree with you on the DDM. Not a bog fan of it though. Of late, I am not doing much valuation as I am predominantly a momentim investor. But, looking to do valuations again for a few stocks. This video will definitely help me.
Glad it helped!
Wow amazing content..!
Thank you very much
I really like your videos!!
Thank you so much!
This method of finding the intrinsic value of a stock sounds like the method used by Warren Buffett. If we analyze stocks like him and act like him we can earn huge profits. Great analysis. Thank you very much.
Glad you like the video & found it informative!
Others are influencers but you are a real teacher sir thankyou very very much sir. But sir can you please make a detailed video on economic moats and how to find companies with very big economic moats
Thank you for your suggestion. What all would you like to understand with regards to moats?
Superb content
Thanks
extremely careful method
Thank you very much.
You are welcome!
Interesting
Cool 🙌
Sir... thankyou for the Excel sheet
Most welcome
Buffettology in less than 20 min...Great!!!
Thanks
Awesome
Thanks! 🙌
Hoping for your and myself best..❤
Excellent explanation
Thanks
Wonderful
Thank you
I felt like learning from warren Buffett himself, such an ease in explaining difficult topics 🙏🙏
Glad to hear that. Thank you for the vote of confidence
Thank you
Welcome!
Great
Nice easy way of Explanation. But i have a difference of opinion in Discounted Cash Flow Analysis in your excel, if possible we can discus.
Thanks. Sure, we can connect over email. I'm at hello@beginnersbuck.com
Love your videos Shankar. Can you make a similar video on how to identify multibaggers?
Thank you. Kindly type 'shankar nath multibaggers' in the YT search bar, I'm sure a few options will pop up.
Wonderful is the Word I would say for this Presentation by Shankar Anna ❤
Thank you very much 🙌
So complex math 😅. Never realised this calculation behind scene 😂. Thank you Shankar
Most welcome 😊 .. the process is nothing but how we think - in reverse. Look at it this way, we buy a house at say, 50 lakhs .. and the assumption is that in 5 years, this will be worth a crore. DCF just reverses this thought i.e. OK, this company will deliver 1 crore after 5 years, what is it worth today? That's it, it's that simple!
@@shankarnath feel great today after your reply
Good , need more on valuation of stocks
Thanks for the suggestion
Great video Sir !!! Also could you emphasize more on your checklist in another video ???
Thanks for the suggestion
Good work. Explained in best way. But please tell me how to get mcap data from 5yr .
Thanks. A rough and dirty way of doing it is to take the current mcap and dividing it by the 5 year price returns. For example - if a company X is at 10000 crore mcap today and over the last 5 years, it has given a share price return of 20% per year. Then --- 10000 divided by (1+20%) raised to the power 5. This will come to 4,018 crores
Sir sorry delay..your presentation awsome
Thanks!
Hey Shankar, Nicely explained!! Appreciate your efforts. Wondering if you have any plans of doing a video on Aswath Damodaran's way of finding an Intrinsic Value of a Stock ??
Thank you. I have no plans presently
@Shakar - I have been trying to learn how to calculate Intrinsic value. Followed the dean of valuation - Prof. Damodaran also. It's a fancy concept and unlike many other financial ratios and numbers, it's quite complicated and has lots of subjectivity to it. In your video you have explained it with a great ease. Thank you so much.
I have a question though on Infosys' intrinsic value. Infosys traded at 854 in Covid times (Jun'20). It will need to shed 40% to get back to that.
Also, it's imp to note - Infosys is trading at historically lower than five-year median PE.
So this gets confusing. As per Intrinsic value - Infosys is not a good buy.
However, as per latest IT sector down trend and low PE - Infosys is a good buy.
What am I missing?
Thank you very much. This intrinsic value calculations are based on my assumptions. Owners earning growth rate, terminal value multiplier, discount rate and the margin of safety were all crucial assumptions. Understandably, on an excel sheet, it is easy to show that even 2000 rupees is a steal for Infosys. Now it's upto you and what you believe it.
The point on Infosys trading at historically lower than the 5-year median PE is an interesting point you raise. Many investors will say "Oh wow! It's low" but over time, I've forced myself to ask "Why is it low? Is it because the growth rate has stalled? Are there headwinds? What is the management saying? etc."
Thank you for this video. Request you to please answer my question, 2 companies of the same sector, similar PE, ROCE, PEG, Promoter holding etc. BUT the 1st company has FV of 10 and the 2nd has FV of 1. Which one would you choose?
I will be indifferent to it. Out of curiousity - why did you ask this question?
@@shankarnath I thought you would be the right person to ask considering your acumen. Had this query in my mind for some time. Thank you once again for the reply and always look forward to your videos 👍
Amazing
Great to hear
Hi shankar. Assuming all assumttions of CF growth, terminal value multiplier turn out to be correct and assune you baught at the price available by DCF method ( without margin of safety) and you hold for 10 years. What return will you earn - CF growth %age? Or Discount rate-12% or something entirely different. ( I'm trying to understand what's the benefit of doing all this future guessing exercise)
Any idea what approach screener uses to show the intrisniy value?
Hi. Have you seen a screener which shows intrinsic value? If yes, pls share. I haven't seen one yet
Sir can you make a video on reverse dcf on tijori finance
Thanks for the suggestion
Hi from Muscat Oman.. I am totally impressed with your clarity in presentation. Would like to
Seek your service in managing portfolio. How to
Reach you?
Thank you very much for your kind appreciation 🙌 . Apologies, I'm not into fund management nor into advisory for now. I'm keen on focussing on education; that's where I am at peace and I think its something I can do well at.
If I were to pick up 1-on-1 consultations in the future, then I'll certainly keep my community informed through a community post.
Q: Where did you get the historical data for market cap?
Soon you will be famous mark my words 👍
Risk hai toh ishq hai
Sir,
I seek clarification regarding the Cash Flow Discounted method. Some experts deduct after-tax operating cash and then subtract capital expenditure. In your calculation, you consider pre-tax cash for evaluation. Which method do you find more appropriate?
Thank you.
I have seen people using either of the approaches. I find the pre-tax part better although over long periods, it shouldnt matter asmuch
@@shankarnath Thank you so much Sir.
Hi Shankar. If you are computing Enterprise Value (Value available to both the debt and equity holders of the company) using the DCF and thus discounting it by the WACC (weighted cost of capital for both debt and equity holders) then in in the final step shouldnt you deduct debt as well in arriving at the equity value? Enterprise value + Cash/Marketable securities - Debt = Equity value
Yes, you are right. Since Infosys barely has debts & what is has is lease obligations, I ignored it. Perhaps I should have taken a different example and clarified the difference between levered and unlevered DCF. So what I did was to find the enterprise value. From here, the debt gets deducted to arrive at the equity value which is then matched with the market cap. So in this case, it will be 5,12,000 crores minus 8,300 crores giving us 5,03,700 crores or 1,202 rupees per share
Which Method should to used for banking stocks in India ?please reply
Please watch my video on how to analyse banks -- ruclips.net/video/mdS4n0R3s0U/видео.html
Hi Shankar, tried following this with few stocks, but did not get expected output. What happens if the profit growth rate is more than the discount rate in the denominator for Divident Discount Model (like in case of HDFC Bank)? Similarly, what happens if a company is not generating significant cash, like Avenue Supermart? How would cash flow analysis work for such companies?
Hello Manish:
1. The dividend discount model has its cons. Please read this document at leisure for more insights on it: pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf
2. I think you mean free cash flow because DMart does have growing & positive operating cash flows but since they are growing, they spend a lot on growth & working capex. In scenarios of you projecting negative FCF (or negative cashflow in other firms) in the future, the result of the DCF would be a negative total present value. You have two options -
a) project the FCF in the future such that they eventually turn positive. This will happen at some point for Dmart also and as an analyst, you have determine when
b) discard DCF for evaluating Dmart (the same hammer can't be used to shape an ivory statuette and for breaking a mountain)
sir can we consider as discount cash flow method is more reliable than relative and dividend discount model? from your pov please guide me. 😅
Hello. Yes, I prefer DCF over the other two methods.
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06:57 should we not consider net cfo which includes tax?
There is no firm rule around it. You can use gross or net per your comfort.
@@shankarnath Thank you, i'm loving your videos and would love to learn lot more from you.
for the terminal value I would also recommend Gordon's terminal valuation model.
👍
Dear Sir,
Thank you for providing valuable information that makes us think out of the box. Your insights are very helpful for investors who want to diversify their portfolio and achieve long-term growth.
I am interested in investing in mid cap index funds for wealth creation only. I have learnt from you that there are different options available in the market, such as Midcap 150, Midcap 150 Quality 50, and Midcap 150 Momentum 50.
I would like to know your opinion on which index or indices to go with, based on your experience and expertise. What are the advantages and disadvantages of each index? How do they compare in terms of risk, return, volatility, and diversification? How much should I allocate to each index, if I want to invest in more than one?
I appreciate your guidance and support. Please reply at your earliest convenience.
Sincerely,
An aspiring investor
Thank you very much for your kind words. I haven't analysed the different types of passively managed midcap funds so I won't be able to proffer an opinion. May I circle back once I am more prepared?
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It got changed ?
@@anoopg95 yes