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.
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!
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
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?
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.
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 😎
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
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?
@@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.
@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.
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.
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?
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
hi, nice video..... let's start a handshake job ......i subbed to ur ch ..u too sub my ch.... sub= subscribe........those who want to do the same can reply to my comment .......
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!
To calculate the intrinsic value of the share price, can you take our calculated market cap divided by outstanding shares to come to an intrinsic value per share?
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.
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!
@@InvestingwithTom Thanks for sharing mate. Btw I could see a Charlie Munger's Book behind you :) So did you get any great formulas from Charlie Munger and Ben Graham's Books?
Hi Tom, this is great, what if in Pabrai model under excess cash we add (cash - debt) amount (could be negative as well to obtain realistic Intrinsic Value?
Hi Tom quick question on the xcel spreadsheet. If the cash flow for a company is not in the billions do we have to change anything when inputting the numbers? Thanks
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!
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'
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?
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
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'
Question, if you saw a fractional share at or less than the price at the price of the intrinsic value which you've determined for a whole share, would you consider buying?
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?
Many companies I am invested in have negative free cash flow. This method doesn't seem to work on these so wondering if you have an alternative method to evaluate such investments. Thanks
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?
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
This was amazing, appreciate it! And Pabrai is one of my favorite investors too.
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!
The Intrinsic Value of This Video is very high, big thank.
Bro you explained this better than all my university textbooks. Thanks.
Thanks for this. One of most helpful videos I have seen so far
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 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
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
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 😂
Great video with added and subtle lessons from SRG
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!
thanks for doing this. appreciate the work and your generous sharing.
Great tutorial. i tried this on Intel, if the inputs are right it shows it's at a good price
How the result?
Thanks Tom, I from Perú and appreciate your videos.. a big hugs
Thanks Tom! Really useful video!
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?
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.
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!
I’m just now finding this video but it is super helpful. Thank you so much!
Great video and explanation
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 😎
Great video, thank you Tom. could you pls share how to deal with negative cash flow in a DCF? thank you.
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
Good stuff bro. Nice to see a fellow Kiwi creating content.
Thanks a lot tom for the spread sheet. Wish you all the best from across the ditch.
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
Very nice video! Thanks for the spreadsheet... I have searched a lot for one..
M C happy to help 🙂
This is good stuff. Thank you
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
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
Love your videos and your ability to simplify complex concepts in a way that anyone would understand. Kudos!
very informational thanks
Great presentation ! Thanks.
I did this for Tesla. Wow! Thanks for the simple, straight forward example.
What was the price?
Per share obviously. Ta
Brilliant Tom. I am a fellow kiwi as well. All the best to you.
Very helpful 👍
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.
Very nice video on DCF. Just what I was looking for. Thanks! 👍
Exceptional video Tom! Well done from across the ditch
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 🙂
Thanks for this! I feel the way you have done it is so clean and much simpler to follow compared to other videos!
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!
In Yahoo Finance, what is the growth rate for ? growth rate for revenue? or net profit or free cash flow ?
Where do you add in dividends?
Also, what’s the formula for an inconsistent earnings stock like “T”?
Love your video! Cheers from Mexico!!
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
Good job dude!!
Hello Tom, Thank you for your video. How did you determine the terminal value of being 15 ?
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?
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, should we be using the TTM number for FCF, or the previous year?
Your subscriber # will grow exponentially over time. Excellent video straight to the point.
Thanks! Appreciate it :)
How are you calculating MOS table? Please explain.
Great youtube video again. Nice and clear.
Thank you!
HEY what are the formulas for the fcf and pv cells?? i cant get my spreadsheet to match...
Hi Tom! Great job once again. Thx for the spreadsheet. This is super helpful for us value investors!
Awesome, great video. This is great stuff. Please continue putting out this level of content. Appreciate you sharing your calculations
Marshall Jones no problem, thanks for watching 🙂
what is the formula for your numbers to change?
Awesome video! This is exactly the stuff I'm teaching myself to do. Thanks for the info!
DonnieDarko happy to help!
hi, nice video..... let's start a handshake job ......i subbed to ur ch ..u too sub my ch.... sub= subscribe........those who want to do the same can reply to my comment .......
What formula was used to discount the PV back
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!
great video and thanks for the spreadsheet ;)
How do you value base it on share price
To calculate the intrinsic value of the share price, can you take our calculated market cap divided by outstanding shares to come to an intrinsic value per share?
Yep, That's right.
is the intrinsic value on the tom sheet of ford already apply the 10% discount?
Hi Tom, can you please send me you template on How To Calculate Intrinsic Value? Thank you.
How do you get your PV values
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!
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!
Thank you for the file. I've been looking for a simple explanation on how to do this.
Hi thanks for sharing. Did you get the formula from the Book?
Yep 🙂
@@InvestingwithTom Thanks for sharing mate.
Btw I could see a Charlie Munger's Book behind you :) So did you get any great formulas from Charlie Munger and Ben Graham's Books?
Thanks for sharing. What is the period over which you take the discount rate? 10 years?
Hi Tom, this is great, what if in Pabrai model under excess cash we add (cash - debt) amount (could be negative as well to obtain realistic Intrinsic Value?
This is effectively what using enterprise value method instead is doing 🙂 Plus EV also includes minority interests, preferred shares etc.
@@InvestingwithTom Thanks
Hi Tom quick question on the xcel spreadsheet. If the cash flow for a company is not in the billions do we have to change anything when inputting the numbers? Thanks
This is what I am wondering.
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!
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'
Do you know what the intrinsic cost per share is now? What about the split?
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?
How can we properly handle situations in which everything in the market is trading at a multiple of intrinsic value as the market is doing currently.
Hi Tom how do you calculate the terminal value?
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
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'
Question, if you saw a fractional share at or less than the price at the price of the intrinsic value which you've determined for a whole share, would you consider buying?
How are the values automatically going in at 7:40 in the video @Investing with Tom
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
What if the FCF of the 1st year is negative? For example, bank stocks usually have negative FCF?
Thanks for the nice video. Why not just use Enterprise Value all the time? Why ever use the 1st method instead of the 2nd?
Many companies I am invested in have negative free cash flow. This method doesn't seem to work on these so wondering if you have an alternative method to evaluate such investments. Thanks
great video, thank u
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 Tom, Can you also explain to compare results of DSF with PEG ratio P/CF and PE ratio to double check our result.
Good stuff mate!
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?
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!
Thanks for the Video....I really appreciate. How did u find the FCF VALUES LIKE 59..66..74 PLZ? Also the PV LAUE 54--55?.Thanks in Advance>
So how much per share is Apple now and how much would you buy it at? Still confused.