Discounted Cash Flow (DCF) Analysis for BEGINNERS - How to Value a Stock Using Tesla as an Example
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- Опубліковано 29 лип 2024
- In this video, I cover how to run a discounted cash flow (DCF) analysis using Tesla as an example.
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⏱Timestamps⏱
0:00 - Introduction
1:44 - Conceptual Explanation of the DCF
6:04 - Why DCFs are Important and When to Use Them
7:51 - How to do a DCF and 4 Key Concepts
12:07 - Tesla DCF Example
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All content in this video is for entertainment purposes only. I am not a professional financial advisor and my statements are not to be taken as instructions or directions. In addition, some of the links above are affiliate links, meaning that at NO additional cost to you, I may earn a commission if you click through and make a purchase.
#dcf #discountedcashflow #valuation
*As I mentioned in the video, here are some further explanations of some of the concepts I brought up:*
*Capital Expenditures (CapEx)* - Cash you spend on Plant, Property, and Equipment (PP&E). So Apple spends $100 million on a new office building, that's $100 million of Capital Expenditures. CapEx is NOT found in your income statement because they are usually really large one-time expenses and the income statement tries to capture expenses that occur regularly. Instead, the costs of CapEx are depreciated over time (see below).
*Depreciation & Amortization (D&A)* - In the CapEx example, if Apple bought a new building for $100 million and that building had a "useful life" of 20 years, the annual D&A would be $100 million / 20 = $5 million a year. D&A IS found in your income statement either embedded into COGS or Operating Expenses. D&A allows you to fairly deduct CapEx spend over a period of time but it's not actual cash that you're spending (instead the actual cash was a one-time payment in CapEx).
*Net Working Capital (NWC)* - For a DCF, this is your current OPERATING assets (i.e. excludes cash, includes assets like inventory, accounts receivable, etc.) minus your current OPERATING liabilities (i.e. excludes debt, includes accounts payable, deferred revenue, etc.). Standard definition for NWC is just current assets minus current liabilities but there's a difference for the DCF. NWC looks at the regular cash inflows and outflows from a company's day to day operations.
*WACC Formula* - As a reminder, this is your (% of equity * cost of equity) + (your % of debt * cost of debt * (1 - Tax rate)). % of equity means [equity value / (equity value + debt)]. cost of equity is found through the CAPM formula (risk free rate + beta * market risk premium). % of debt is [debt / (debt + equity value)]. You multiply the debt part times 1 - tax rate because interest payments are tax deductible.
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Hey Ben, thanks for all the explainations. I was wondering whether JPM really uses CAPM model and not a more advanced one as other tier 1 banks. It seems too simple to me :D Keep up the good work!
i am missing an explanation of the following term: cost of debt
would highly appreciate it.
@@qwertz9501 cost of debt (i think) would be the interest rate that theyre paying on debt, its like how much its costinf them to borrow money.
I took a 9hr course on DCF and you cleared my problems in 18mins. Thank you so much
good to hear! haha
Hi Ben, I am a year-one LSE student. So many of our students are trying to get into investment banking and it's really nice of you to provide free contents. Thank you so so so so so so much!
It is crazy how helpful this channel has been for me over the past couple months. From learning about a career in investment banking a few months ago to helping me prepare for a finance quiz I have tomorrow… The high quality of your videos isn’t going unnoticed and I don’t doubt this channel will really blow up soon!
Your explanation is incredibly amateur-friendly and is definitely interesting that it made me watch the entire thing at 2.30am in the morning. Really appreciate your dedication and knowledge and I am excited to watch your other videos and those upcoming ones! 😁
Started watching back your live stream of how to build one of these models. Extremely helpful. Have been looking for a while around this topic, however have found your walk through on the live stream and explanation in this video to be one of the best ive found. Appreciate it.
Thanks so much! Super helpful in preparing for a corp fin interview - concise and to the point. Also thanks for including text boxes - makes it much easier to write down notes 😊
DUDE I needed this like last week!! The struggles I had at work trying to figure this out 😂😂
Really helpful. I’m 17 trying to get into this and your channel is so helpful
really appreciate this content. looking forward to future contents like this
Very helpful! I really like that you added explanation and how you use the DCF model at work .
Nice and simple breakdown. Great job. This would be useful for people who are learning
Thank you for clarifying the concepts of DCF and WACC. it is very helpful to a non-business student earning an MBA.
great informative videos and appreciate the added video effects you do to make it more appealing
Thank you so much for your video, Ben. I like it a lot, especially the way you explain and communicate. Love it and will be your loyal follower
no problem and thank you for the support!
I’ve been waiting for this. Thank you for doing ittttt
no prob!
Love your teaching!!! so simple and clear :)
Appreciate the work and effort in explaning the concepts!
Thanks for sharing. Very articulated piece
Thanks for this! You're a good teacher! 👍🏾
Your content is great man!!
Thank you for this! Super helpful and useful- loving the IB insights.
Glad it was helpful!
Great video, thank you for sharing it. Congrats!
You are super helpful! Thank you so much for this!
Interviewer: Walk me through a DCF
Me: hold my rareliquid subscription
LOL
Interviewer: What's the best method for calculating Terminal Value?
Ben: Perpetuity Growth Method is without a doubt the absolute best method
Interviewer: Why?
Ben: It's the only method I've used.
Really great video! I personally look at forecasting and DCF as two different parts of an analysis
Favorite kind of videos!! keep it up man!
thanks! will do
Thanks for sharing Ben. I'll be greatful if you do a series about finance for beginners😍
Thanks Ben for sharing precious information as always!
no prob~
Thank you for this great video, I love the formatting
Glad you enjoyed it!
Eyyyyyy glad to see my fellow bear. Go Bears! , instant sub.
This was extremely helpful! I’d love more basic corporate finance videos and examples. Looking forward to your next vid🙂
thanks daniel!
Love the videos. Keep em coming!
Thanks Andrew!
Hi I'm recently getting my 1st year Finance classes started in GWU, I'm really nervous and stressful but after learning from your video at least I can have a little bit more confidence on prep for what I will learn in the upcoming classes!
Thank you for YOUR useful content!
Fire video, thank you.
Good video, very helpful for my group work haha, thanks
It was pretty much helpful 👍🏻👍🏻
Very clear explanation, extremely helpful ！ thanks a lot ~~~~
thanks more then a lot (= keep up the grind: its unique
Great Video! Even that i am advanced in this field, i kind of enjoyed the explanation. More of that !!👍
Thank you, This video is very helpful, I'll learn many thing from your channel
You are the best bro
Thank you!!
finally! this is exactly what i need ;p
Content keeps getting better and better🙌🏼
thanks!
Love your videos so much!
Thank you so much!
This is amazing bro as a trader this gives you an edge when it comes to trading and valuations thanks a lot brother
Amazing!
great explanation, rareliquid!
thank you anna!
You rock, dude. 😊
Very helpful! Thank you!
np sara!
great video very informative
This is helpful...assisted me in my home work
Leaving some love in the comments!
thank you!
Thanks, your video help me a lot thanks
Thanks It very helpful
Very valuable content! I'm trying to go into IB but it's hard if you're 29 yo with no prior exp in that field. My goal is to get an internship (doesn't have to be in a BB oder top tier bank) and I'm trying to increase my chances by completing an IB course on udemy. Keep going with your content! I like them, new sub here👍
Great video, keep it up!!
Thanks!
nice content !
Love ur videos better than my professors~
Love this kind of videos
good to hear!
Thank you
Really good video! Very informative and easy to understand.
But i realised that i really have to up my finance english skills. Some definitions you gave were a little fast for me. But thats not your fault!
absolutely clear! Could u plz make M&A transactions on the next one?
This is higher quality that the materials I was given at Uni.
Good Job!
Thanks!
Hi Ben. I am late to this video but have watched it thoroughly and would like to thank you for the great knowledge shared. Could you please tell me how you arrived at the exact number for years 2021 and 2022 for the Unlevered FCF. I understand the equation but am struggling to arrive at the same numbers of 4,535 and 7,500 respectively, as you did. Thanks a lot!
Amazing😍
Thanks for the great video. I have a question: Why would you choose to discount the cash flow over 5 years versus 10 years? This would make a huge difference of the value, so how do you decide how many years to discount?
Here before rareliquid reaches 1M 🤩
Thanks:)
Hello, just discovered and subscribed to your channel 😉 you mentioned DCF applied to biotech companies. Could you please share one of such DCF? I am working in a pharma company and I am very interested in this topic, thank you very much
Brother, you are doing such a great thing. Thank you so much. i would like to request you to bring some more videos on financial analysis. if you are free then please try to make details explanation with some examples in excel.
Thank you for the video. It was simple and clear.
Also, will you be posting a excel sheet with a templete for DCF?
I would of lover to seen you use the exit multiple. And fcf gives us market value too, I've seen ppl use a terminal multiple times the fcf to get market cap.
Great content and love the animations in your presentation. "Off-White vibes"
awesome!
Thanks!
Great video! Would really appreciate if you could also make some videos on LBO analysis and other valuation methods.
i did post about comparable comps already but probably won’t do one on lbo or precedent transactions because they’re not really relevant for most retail investors
Great explanation. Subscribing ✅
Awesome, thank you!
Great video, thank you! Can you tell us a bit more about how did you build up your excel sheet so that you can import the data from PDFs? Thank you!
if you go to bamsec and sign up either for the free trial or by paying you can download the data to excel
How would you go about projecting NWC, EBIT, and Capital Expenditures?
Waiting for the advanced DCF Model :)) Thanks a lot
coming soon~
Could you please mention how did you move your borders in slides? I have searched everywhere but not able to find it. Please.
i guess the crypto startup use similar valuation model now. it's a great explanation to a outsider like me who is currently trying to propose a valuation for fundraising event. thanks a lot
Great video! Do you have a DCF spreadsheet calculator that you recommend for beginners?
Damn bro wanna be my tutor 😂🤣 studying this in uni rn 👏😎
Ben
I would like to know if this is a good time for investing in mutual fund, in term of covid-19. In my country, there are some funds that once purchased we can use the amount to deduct the individual income tax. The situation in my country is still very bad. Pls advise.
Is terminal value not used when calculating actual share price? I thought it was but I am confused about where is it included in the equity value calculation
Great video. Where did you get the growth rates from?
You should do a series of videos making in-depth models for trending stocks. Oh and thanks I really enjoyed your video.
Just found you. Please give more content so we can continue to learn to invest lol
5:21
8:08 cf. Stable top line rev
Enterprise value means the same thing as intrinsic value?
'Relatively predictable'
Hey Ben, quick question. Where do assumptions come from? You said that almost all assumptions will be wrong but I doubt that IB analysts input random numbers there. Are the assumptions derived from various findings in the 10-Ks?
Can you do more examples and analysis of companies? Like a top down analysis of Ali Baba stock and then a DCF on it. Thanks!
very useful video. My question is based on what you make your assumptions ?
Can you teach us other valuation methods like ratios and other stuff.
Great video ! Is there anywhere I can download this or a similar DCF example ?
I find it very useful to get the concept and play around with.
available on my patreon: www.patreon.com/rareliquid
Commenting for the algorithm
thanks!
Cool.
@rareliquid - ma you please recommend or share a DCF template?