Intrinsic value per share $ 131.10 Current value per share $ 129.09
Adjustment $ 2.01
It is our recommendation that AAPL is currently undervalued by $ 2.01 according to the ‘FCFF 1 Stage DCF Valuation’ model.
It is recommended to BUY or HOLD (Expected Fluctuate gain of 1.55%).
DCF 2-Stage Valuation H Model
EPS $6.45
DPS $ 1 .82
DPR 28 .2%
COE 7 .88%
E (g) 2013 13.60%
E (g) 2030 5.50%
Stable Growth Value $ 80 .68
Extraordinary Growth Value $ 41 .92
Intrinsic value per share $ 121 .78 Current value per share $ 129.09
Adjustment ($ 7 .31)
It is our recommendation that AAPL is currently overvalued by $ 7 .31 according to the ‘H Model 2 Stage DCF Valuation’.
It is recommended to SELL or HOLD (Expected Fluctuation loss of 5.66%).
P/E Adjusted Multiple Valuation Model
EPS $ 6.45
DPS $ 1.82
E (g) 5.50%
Payout Ratio 28.21%
Beta 0.96
P/E Actual 16.45
P/E Adjusted 13.51
Intrinsic value per share $ 87.16 Current value per share $ 129.09
Adjustment ($ 41.93)
It is our recommendation that AAPL is currently overvalued by $41.93 according to the ‘P/E Adjusted Multiple Valuation’.
It is recommended to SELL Expected Fluctuation loss of 17.87%.
P/BV Adjusted Multiple Valuation Model
EPS $ 6.45
DPS $ 1.82
E (g) 5.50%
Payout Ratio 28.21%
Beta 0.96
ROE 35.15%
BV/Share 21.17
P/BV Actual 6.07
P/BV Adjusted 4.83
Intrinsic value per share $ 102.25 Current value per share $ 129.09
Adjustment ($26.84)
It is our recommendation that AAPL is currently overvalued by $26.84 according to the ‘P/BV Adjusted Multiple Valuation’.
It is recommended to SELL Expected Fluctuation loss of 20.79%.
P/S Adjusted Multiple Valuation Model
EPS $ 6.45
DPS $ 1.82
E (g) 5.50%
Payout Ratio 28.21%
Beta 0.96
ROE 35.15%
Net Margin 22.25%
Enterprise Value $751,990m
EV/Sales 3.76
Shares Outstanding 5,820m
P/S Actual 3 .74
P/S Adjusted 3.45
Intrinsic value per share $ 118.70 Current value per share $ 129.09
Adjustment ($10.39)
It is our recommendation that AAPL is currently overvalued by $10.39 according to the ‘P/S Adjusted Multiple Valuation’.
It is recommended to SELL Expected Fluctuation loss of 8.05 %.
EV/S Adjusted Multiple Valuation Model
REGRESSION 1.39 + 6.93(OPM)
EV/S Actual 3.76
EV/S Adjusted 2.89
Intrinsic value per share $ 90.38 Current value per share $ 129.09
Adjustment $38.71
It is our recommendation that AAPL is currently overvalued by $38.71 according to the ‘P/S Adjusted Multiple Valuation’.
It is recommended to SELL Expected Fluctuation loss of 29.98 %.
Appendix
Assumptions
Collective
Note; all accounted as at 3 March 2015, for recommendations of valuation as follow through;
30 year U.S Government Bond yield 2 .60%
Beta as per AAPL Historic Data 0 .96
US common stock 30 year return 5 .50%
AAPL current share value $ 129.09
30 year US Inflation rate 3.25%
30 year US GDP rate 2.25%
NOTE;
E (g) Stable Firm must not exceed 5.50%
It is important to know that some calculations may refer to previous assumptions made throughout Appendix 2.0.
NOTE:
The following three questions apply Approach B2, the use of regression results from Professor Aswath Damodaran’s website:http://www.damodaran.com. Initially a regression was run using the Computer Peripherals Industry data provided, however there were multiple negatives with this approach. Firstly, Strastasys Ltd. and Nimble Storage Inc. were excluded from the data set, as there was insufficient information available in relation to Current P/E. Secondly, a large outlier was identified after running a regression with Current P/E and a common fundamental, Beta. Exclusion of the large outlier, 3D Systems Corp., from the data set left only 12 comparable firms; noting Apple is not included in the comparable firms data. A small data set does not fully measure the degree to which variations in the fundamentals could affect the multiples. Fluctuations in growth, payout, risk, ROE and net margin are more likely to be quantified based on actual market data with a larger number of firms. In addition, Professor Aswath Damodaran’s regressions have all the expected signs and coefficients involved with regressions for relative valuations. The T-statistics are above 2 for each fundamental involved, and thus can be considered statistically significant. Therefore, the following relative valuations are based on Professor Aswath Damodaran’s market-wide regression which controls for all publicly traded United States (US) companies.
DCF 1-Stage Valuation FCFF Model
as per 2014 AAPL Financial Statements & Historic Data;
Interest rate on debts payable, 10 .00%
Tax Rate 26 .10%
“ 000 000
Outstanding shares 5 820
Net Income $ 39 510
Interest Expense $ 384
Depreciation & Amortisation $ 7 946
Capital Expenditure $ 13 578
Long Term Debt $ 28 987
Book Value $ 1 115 777
Change in WC $ (24 545)
DCF 2-Stage Valuation H Model
30 year US Bond Rate remains constant
Dividend Payout Ratio remains constant
Tax Rates remain constant
Market Risk Premium remains constant
Beta remains constant
P/E Adjusted Multiple Valuation Model
The relative valuations used are based on the current, rather than forward or trailing P/E, which requires earnings per share (EPS) at time zero. Current P/E is used because valuations are based on most recent data available. Diluted EPS is used, as it is a conservative metric that considers all possible dilution that can take place.
The risk-free rate of return is a theoretical return on investments with no risk. Treasury bonds have very little risk and therefore the rf used for these stock valuations is derived from the long-term (30 year) US Treasury bond rate. Based on US data, not Australian, as Apple is a US listed company and the regression uses all publicly listed US companies.
(Risk free rate (Rf) = 30 year U.S Government Bond yield = 2 .60%
Market risk premium = US 30 year stock from S&P 500
Beta as per Peripherals Industry data (March 1 2015) = 0 .96
(DPS) as per Peripherals Industry data (March 1 2015) = $1.82
P/BV Adjusted Multiple Valuation Model
The following calculations are in addition to those used for Q3: P/E Multiples.
Intrinsic Value = BV/Share x Adjusted P/BV = 21.17 x 4.83 = $102.25
The following assumptions are in addition to those used for Q3: P/E Multiples & Q4: P/BV Multiples.
Net Profit Margin (Net Margin) = 22.25%
As provided in the Computer Peripherals Industry table (current as at March 1 2015).
EV, EV/Sales, & Shares Outstanding
As provided in Computer Peripherals Industry table (current as at March 1 2015).
EV/S Adjusted Multiple Valuation Model
The following assumptions are in addition to those used for Q6: EV/S Multiples
After tax operating margins: Provided by Google Finance
EV/S, REVENUS, ENTERPRISE VALUE As provided in the Computer Peripherals Industry table (current as at March 1 2015).
NOTE:
The following question was valuated using Approach B1 (using own regression)
The company comparable that were given within the project data set were analysed and interpreted to create a set of data that allowed an accurate regression to be run. Within this set of data, outliers were located and removed based on obvious observations and a mean and median were calculated to help justify the data set. Both the mean and median were fairly similar, only differing by one - two units validating the data set as being a fair representation of the company comparable. T stats were above two and slope was positive.
Also, given the nature of the question “ intrinsic value”, understanding the regression i.e. deriving from known sources furthers characterises the initial valuation. The valuator true value based on the fundamentals used that allocated its underlying perception of it.
COC 0.10 x (1 - 0.261) x (28 987 /(28 987 +13 578)) + .0788
DCF FCFF Value 706.78 / (0 .1291 - .055)
DCF 2-Stage Valuation H Model
COE0.026 + 0.96 x 0.055 E (g2030)0.0325 + .0225 E (g2013) 6 .45 - 5.68) / 5.68
E (g2014) 0 .136 - [0.136 - 0.055)) / 1 - 17] E (g) Value Stable1.82 x (1 - 0.055) / (COE - 0.055) E (g) Value Extraordinary .82 x (16/2) x (0.131 - .055) / (0.0788 - 0.055)
DCF H Model Value$ 80.68 + $ 46.35
The following assumptions are in addition to those used for Q3: P/E Multiples.
ROE = 35.15%
Return on Equity as provided in Computer Peripherals Industry table (current as at March 1 2015). A calculated ROE (g/(1-Payout)) was attempted but produced an ROE that appeared far too and thus resulted in a very low P/BV.
Book Value per Share (BV/Share) = 21.17
As provided in the Computer Peripherals Industry table (current as at March 1 2015).
P/S Adjusted Multiple Valuation Model
The following calculations are in addition to those used for Q3: P/E Multiples & Q4: P/BV Multiples.
NOTE;
Stratasys Ltd. (NasdaqGS: SSYS)
Nimble Storage, Inc. (NYSE:NMBL)
Cray Inc. (NasdaqGS: CRAY)
All considered outliers; data provided was irrelevant and skewed in comparison to the following data set.
REGRESSION: 1.39 + 6.93(OPM)
(Slope is positive, continue with regression)
DD)
