WACC

anotherloserhere

No idea what anything you said, meant. WACC? That's whack. Growth? Stonk goes up? Terminal value assumptions? I assume you mean up?

Wandering_trader99

So page 1, I just put a general summary for the stock, in this example I liked the flip in recent institutional ownership with AMD as well as rising chip demand. It looked like the bottom was in(and looking back now, it was..) I'm sure I also checked short interest + options flows as this is something i typically assess. On the next screenshot of my report, I broke down some of the fundamentals I liked with AMD: \- FCF was in a consistent and growing uptrend (Data consistently shows stocks already in a general FCF uptrend, tend to continue their uptrend and investing in stocks with a declining FCF trend is less likely to yield results even if their expected FCF is expected to turn around that year.) However, looking back, I disagree with my use of a DCF model & I now believe P/E is a bit out dated and crap when analysing HUGE growth tech stocks. \- I was correct about the solid returns the business was making and how their ROIC/WACC ratio was really good thanks to their Xilinx adaptation. \- My analysis of EPS growth was also pretty spot on. investors realized AI demand was real & MI300 made AMD the next big provider after NVidia. \- When it came to profit margins, I was optimistic as they trumped Intel and only fell short to the number 1 player NVDA. At the time, most investors were worried about this hence the stock dropping \~65% from ATH but this seemed like a major over reaction. \- And lastly, the debt to equity being 0.2 was solid. I typically go for stocks with a ratio below 1(preferably below 0.8. actualy)

BridgeOnRiver

Problem is you gotta discount the cash flows. GTA6 will be released in 2056. 30 years at WACC of 10% means it’s worth exactly 5 oranges and a banana today.

borsTHEbarbarian

If you're not brave enough to even try to actually model the company yourself, why should anyone take your opinion seriously?  Just put your own assumptions in and have AI do the math for you. Tesla Sum-of-the-Parts Valuation Base Case – May 2026 Fair Value per Share: $672 Core automotive $480 B valuation $133 price per share 1.9 M steady-state vehicles/year at 18% gross margin, 20× EBIT multiple FSD Subscription $525 B valuation $146 per share $100/mo through 2027, then gradual rise to $250/mo by 2035. Take-rate 15% (2026) → 78% (2035) Cybercab / Robotaxi $380 B valuation $106 per share Conservative early ramp to 50k/mo by end-2028, second wave to 90k/mo by end-2030 Energy Storage (Megapack) $360 B valuation $100 per share Strong early growth, 20% CAGR 2030–2035, then 15% thereafter. Margins 28% → 33% Optimus (Hardware + Subscription) $520 B valuation $144 per share Hardware + $250/mo subscription. All 2026–2027 units used internally. Scales to 2.5 M units/year by 2035 Other $45 B valuation $12 per share Supercharger, Insurance, Regulatory credits, etc. (kept modest) Total Enterprise Value $2,310 B $641 WACC 10.5%, terminal growth 3.5%. $30B debt raise modeled (no equity dilution) One-time HW4 Fleet Spike ~3.4 M existing HW4 cars without FSD → 20% net stick rate = 680k new subscribers spread gradually over Q4 2026 – Q4 2027 These are pretty conservative estimates, not anywhere close to Elon's numbers or timelines. And the current fair market value has huge upside, with lots to grow in the coming years.

Odd_Jobs_Hat

Ballpark correct even though NPV should be 1.5 and discount rate / WACC is likely higher than 8% because of current equity returns increasing cost of equity into double digits. Should be valued at ~20x EBITDA which is roughly accurate for a large tech company. Could argue closer to 30x (imputing lower annual profit / EBITDA) given companies like insurance co bragging AI tech to justify ~20-25x multiples vs this, an actually differentiated actual tech company. Basically 1/20th to 1/30th of market cap (technically should be enterprise value but close enough) in real cash profit per year.

alpenmilch411

Sending in my AI slop producer to engage with yours. "Kinetic divergence" and "cash-generating physics" gave the game away early so figured I'd just match the energy. **The 25x FCF multiple is asserted not derived** — that's the pillar of your +100% upside. CHKP cost of equity at risk-free 4.30% + Damodaran ERP 4.33% + sector beta \~1.05 = 8.85% Ke. With terminal-g 1% (already generous given the +3% FY26 revenue guide), implied capitalization is FCF / (r-g) = $1.234B / 0.0785 = $15.7B EV — below your current $14.16B operational EV. To hit your $30.85B target you'd need WACC \~5% or terminal-g \~4-5%. Neither is defensible for a 6%-grower whose products+licenses line just printed -3% YoY. **The 17% FCF growth has a one-off in it.** From CHKP's Feb 12 2026 Q4 release verbatim: >"Tax rate reduction, updated tax provisions and a tax settlement, resulted in a benefit of approximately $1.90 to GAAP and Non-GAAP EPS." That's the $66M Israeli tax-authority settlement covering 2016-2020 (20-F Note 11b, page F-42). Strip it and underlying FCF growth is closer to 8-10%. **The margin compression isn't framework noise — it's mgmt's own admission.** GAAP op margin: 37.2% (FY23) → 34.2% (FY24) → 30.5% (FY25) → 27.7% (Q1'26). 950 bps in three years. From the FY2025 20-F Item 5, page 41 verbatim: >"In 2025, our operating margin was 30% compared to 34% in 2024. The decrease in our operating margin was primarily due to an increase in our workforce related expenses, cloud expenses, stock-based compensation expenses and amortization of intangibles expenses in related to our acquisitions." That's CHKP acknowledging the compression is structural — Lakera + Cyata + Cyclops + Rotate + Veriti acquisition amortization plus rising cloud opex. Your $1.234B FCF anchor is backward-looking. Forward FCF through FY27-28 looks flat-to-declining at this rate, which doesn't earn a 25x multiple regardless of "software" framing. **The products+licenses line is the share-loss footprint.** Q1 2026 products+licenses revenue $110.8M vs $114.1M Q1 2025 = -2.9% YoY (Q1 2026 6-K Statement of Income). Same quarter PANW Strata NGFW grew product revenue +16% and FTNT product revenue grew low-double-digits. Your "kinetic divergence" framing bundles this into "+5% total revenue" by netting it against subscriptions +11%. The market is correctly pricing the actual share-loss data that just printed. **Buyback IRR check.** Per the 20-F Item 16E: 6.8M shares repurchased at \~$206 avg in FY25 ($1.4B total). Tape is $115. -44% IRR on FY25 buybacks alone. The $2B convertible issued at $191.10 reference price (Dec 3 2025 per 20-F Note 10) funded part of this. Cumulative $17B looks great in a presentation but marginal IRR over the last 18 months is deeply negative. Mgmt has been buying through the de-rating and missed the signal. **The convertible's capped-call caps your rerate upside.** From 20-F Note 10: >"$2.0 billion of 0.00% Convertible Senior Notes due December 15, 2030; conversion price approximately $243.65 per ordinary share (4.1042 conversion rate per $1,000 principal); capped call initial cap price approximately $334.43 per share (75% premium over the $191.10 reference price on December 3, 2025)." So even in your bull case where multiple recovers and stock doubles, dilution kicks in around $334 (8.2M shares of conversion exposure, capped-call covers the bottom 37%). Limited-upside / full-downside asymmetry — one structural reason the discount may stick rather than mean-revert. I'm not arguing CHKP is a bad investment — watchlisting it myself with entry around $95-98. But the $33B target rests on a 25x multiple that isn't defensible at CHKP's actual WACC + growth profile, and the FCF growth headline has a one-off baked into the YoY comp. (My slop producer would also like me to note that "fundamental gravity pulling the price" is not, in fact, a thing.)

alpenmilch411

Sending in my AI slop producer to engage with yours. "Kinetic divergence" and "cash-generating physics" gave the game away early so figured I'd just match the energy. Substance below regardless of how either of us got it onto the page. The 25x FCF multiple is asserted not derived — that's the pillar of your +100% upside. CHKP cost of equity at risk-free 4.30% + Damodaran ERP 4.33% + sector beta \~1.05 = 8.85% Ke. With terminal-g 1% (already generous given the +3% FY26 revenue guide), implied capitalization is FCF / (r-g) = $1.234B / 0.0785 = $15.7B EV — below your current $14.16B operational EV. To hit your $30.85B target you'd need WACC \~5% or terminal-g \~4-5%. Neither is defensible for a 6%-grower whose products+licenses line just printed -3% YoY. The 17% FCF growth has a one-off in it. From CHKP's Feb 12 2026 Q4 release verbatim: ▎ "Tax rate reduction, updated tax provisions and a tax settlement, resulted in a benefit of approximately $1.90 to GAAP and Non-GAAP EPS." That's the $66M Israeli tax-authority settlement covering 2016-2020 (20-F Note 11b, page F-42). Strip it and underlying FCF growth is closer to 8-10%. The margin compression isn't framework noise — it's mgmt's own admission. GAAP op margin: 37.2% (FY23) → 34.2% (FY24) → 30.5% (FY25) → 27.7% (Q1'26). 950 bps in three years. From the FY2025 20-F Item 5, page 41 verbatim: ▎ "In 2025, our operating margin was 30% compared to 34% in 2024. The decrease in our operating margin was primarily due to an increase in our workforce related expenses, cloud expenses, stock-based ▎ compensation expenses and amortization of intangibles expenses in related to our acquisitions." That's CHKP acknowledging the compression is structural — Lakera + Cyata + Cyclops + Rotate + Veriti acquisition amortization plus rising cloud opex. Your $1.234B FCF anchor is backward-looking. Forward FCF through FY27-28 looks flat-to-declining at this rate, which doesn't earn a 25x multiple regardless of "software" framing. The products+licenses line is the share-loss footprint. Q1 2026 products+licenses revenue $110.8M vs $114.1M Q1 2025 = -2.9% YoY (Q1 2026 6-K Statement of Income). Same quarter PANW Strata NGFW grew product revenue +16% and FTNT product revenue grew low-double-digits. Your "kinetic divergence" framing bundles this into "+5% total revenue" by netting it against subscriptions +11%. The market is correctly pricing the actual share-loss data that just printed. Buyback IRR check. Per the 20-F Item 16E: 6.8M shares repurchased at \~$206 avg in FY25 ($1.4B total). Tape is $115. -44% IRR on FY25 buybacks alone. The $2B convertible issued at $191.10 reference price (Dec 3 2025 per 20-F Note 10) funded part of this. Cumulative $17B looks great in a presentation but marginal IRR over the last 18 months is deeply negative. Mgmt has been buying through the de-rating and missed the signal. The convertible's capped-call caps your rerate upside. From 20-F Note 10: ▎ "$2.0 billion of 0.00% Convertible Senior Notes due December 15, 2030; conversion price approximately $243.65 per ordinary share (4.1042 conversion rate per $1,000 principal); capped call initial cap ▎ price approximately $334.43 per share (75% premium over the $191.10 reference price on December 3, 2025)." So even in your bull case where multiple recovers and stock doubles, dilution kicks in around $334 (8.2M shares of conversion exposure, capped-call covers the bottom 37%). Limited-upside / full-downside asymmetry — one structural reason the discount may stick rather than mean-revert. I'm not arguing CHKP is a bad investment — watchlisting it myself with entry around $95-98. But the $33B target rests on a 25x multiple that isn't defensible at CHKP's actual WACC + growth profile, and the FCF growth headline has a one-off baked into the YoY comp. (My slop producer would also like me to note that "fundamental gravity pulling the price" is not, in fact, a thing.)

Ok_Aspect2804

do you not know how WACC and capital structure works... or done a DCF. equity is more expensive than debt because equity-holders demand a higher return for their invested capital. since this is a majority dilutive action, this pushes up the cost of equity (or the theoretical servicing cost that the firm needs to pay to compensate shareholders). there's no such thing as having it both ways. the company is inducing equity risk when it comes to the issuance of those notes.

mithyyyy

>If im wrong please site a source showing how it would be calculated. do you not know how WACC and capital structure works... or done a DCF. equity is more expensive than debt because equity-holders demand a higher return for their invested capital. since this is a majority dilutive action, this pushes up the cost of equity (or the theoretical servicing cost that the firm needs to pay to compensate shareholders). there's no such thing as having it both ways. the company is inducing equity risk when it comes to the issuance of those notes.

mithyyyy

GME's debt isn't 0% dawg, since it's convertible notes i assume they weight it at WACC or whatever appropriate equity cost. there's no such thing a 0% interest

banff_lover

The virtue signalling is in this sub is unbelievable. If you don’t like it just don’t invest. Going off topic and rage baiting to internet strangers must be new cool. OP - I’m not invested in PLTR. So this analysis is just for my interest. Assuming terminal growth rate at 3%, and FCF at 30% (right now it is 50%+ so being conservative ) fair value would be something like in 90s depending on WACC.

_lueless

Man all this talk about rates is WACC

Odd_Veterinarian4381

Morning sell-offs like this are usually a gift for fundamental investors who can separate legal noise from cash flow reality. I’m part of a small independent research team (XIPEN). We are three people: a researcher, a PhD in Process Modeling, and a PhD in Quantum Mathematics. We built a quantitative engine to treat financial statements as clinical data, removing the emotional "Magnificent 7" bias. We just ran $META through our **Hybrid DCF** stress test, and the discrepancy between the market and the math is one of the widest we’ve seen in the tech sector. **The XIPEN Metrics for Meta Platforms:** * **Intrinsic Value:** $1,047.93 (Current Price \~$670) * **Margin of Safety:** 56.4% * **Quality Score:** 78.75/100 (B+) You can check out our result in a friendly way in: [https://xipen.es/en/cards/?cromo=META](https://xipen.es/en/cards/?cromo=META) **Why our model sees $1k+ while the market panics:** * **The Capex "Fear":** Investors are worried about infrastructure spending. Our **Lifecycle Score (0.134)** uses sigmoidal convergence to model this. At 0.13, Meta is still in a prime "Growth Cycle" (4/4/3 year phases). Our engineering lead models their reinvestment not just as "spending," but as **Sales-to-Capital efficiency**. Even with massive Capex, their ability to convert that capital into future revenue is top-tier. * **Risk & Discounting:** We don't use a random 8% discount rate. We build a **bottom-up Beta (1.39)** specifically for Internet Content & Information and infer a **synthetic AA credit rating** from their Interest Coverage Ratio (71.4x). This provides a clinical, risk-adjusted WACC that accounts for the current 4.44% Risk-Free rate. * **Returns (Pillar 1):** Meta has a **100/100** score in Returns. Their ROIC and ROE are practically unbeatable in the sector. **Conclusion:** From a Process Modeling perspective, the layoffs and legal setbacks are friction, but they don't break the "Metabolic Rate" of Meta’s cash generation. Our math suggests that at $670, you are buying a world-class asset with a nearly 60% discount on its fundamental value. We are bullish, but we’d love to hear from you: Is the "Magnificent 7" pullback a structural shift in risk, or are we just seeing the market misprice Capex-heavy winners again? *Not financial advice. Just the output of our multidisciplinary research lab.*

Junior_Author2337

\[PHARMACOLOGICAL DISCLOSURE: FINAL PHARMACOLOGICAL DISCLOSURE: This entire document was produced under the chemical influence of sertraline 50mg, which apparently does not impair the ability to run DCF models but does impair the ability to write shorter posts. The WACC is 7.0%. The dose is 50mg. Both of these numbers are correct. JA JA JA DISCLOSURE AFTER READING IT FOR ABOUT AN HOUR.......

Gornsen

Bro, who calls their blended entry WACC

rum108

Bag holder with WACC in the $450s…. 😰

rum108

# bag holding with WACC in the $450s…. This has been 1 of my very worst picks in recent times.

hubblebubble7

Depends on your WACC

j_hes_

Basic Models= CAPM, WACC, delta hedge, gamma hedge, spreads, and condors.

SuperRedHulk1

You clearly haven’t, if you don’t know that debt financing is significantly cheaper than equity. Have you heard of a WACC? In case you haven’t, it’s the cost for a company to finance operations. A 100% equity cost structure (which AVAV has) results in an astronomically high WACC, when using a debt instrument could achieve the same result at a far smaller detriment to shareholders And, “a bit” of equity dilution, is certainly a way to put a float increase of 60%

Sea_Custard2892

We are witnessing a classic transition from the 'Hope' phase to the 'Show Me' phase of the AI cycle. The Q1 sell-off is a fundamental repricing of the Capex-to-FCF ratio. With the Big 4 projected to spend over $650B on AI infrastructure this year, investors are finally reacting to the inevitable margin compression. When you combine that with oil-driven inflation keeping the Fed's hands tied, the Weighted Average Cost of Capital (WACC) rises, which naturally punishes high-multiple growth stocks. It’s not just an overreaction; it’s a multiple contraction driven by the realization that AI monetization might take longer than the infrastructure burn suggests. Growth at a reasonable price (GARP) is back; growth at any price is dead.

rum108

# WACC… $450s…. Deep red … no eyes to see

rum108

# my WACC… $45*. Bought the bulk at 200-day MA….fml 🤦‍♀️

doctorsauceboi

Lot of info here, I love ROIC:WACC ratios. You have to have this along with growth and profits, but I think these are key.

Disastrous_Way9425

Wal Mart has a ROIC (Return on Invested Capital) of 12.13% and a WACC (Weighted Average Cost of Capital) of 7.28%. This puts in a growth mode without destroying it's value. It is also considered to have a wide "moat" compared to it's competitors.

SamusAlways

"Optimistic"? Most CAPM and WACC models assume a 7-8% return based on average return of 50+, but some of you are so young that you forget the market also goes down. No matter how much the news tells you it's true, 7 companies do not actually make up the entire US economy.

dkdnfndmsk

As long as ROIC is above the WACC, for every dollar they spend, they’re generating shareholder value. The only problem is ROIC weights backward returns in as well, so going forward an incremental ROIC would show a better picture. We can’t really look back and say how this will play out since we’re in new territory. For right now though, Amazons “track record” is above what it needs to be to keep investing capital with long term shareholder gains above opportunity cost and cost of debt.

Neat-Voice2456

Well you just have to understand what the calculator is doing and if it makes sense. After 2031, the calculation runs in perpetuity at a 2-3% growth rate. Now does it seem realistic that Spotify will grow at 2.5% from 2032 on? To me that seems too low. I don’t think Spotify will only grow at 2.5% starting in 2032. So how do we account for that? You can do the DCF for a longer period (say, 10 years). Or you can raise the terminal growth rate. You can maybe use 4-5%. You’re not likely to see people suggesting terminal growth rates of 4-5%. But I don’t see anything wrong with it. 10-15 years after the end of the DCF (2041-2046) when Spotify might be growing less than 4-5%, the discount factor is so high that the cash flows really aren’t having much of an affect on the share price. And if we think about 2032-2041, the average revenue growth rate is probably going to be something like 4-7%. I’d keep the 5 year DCF, but make the terminal rate 4.5%. I think that’s much more representative of what will likely happen than 2.5%. And it might feel too optimistic because it’s not gonna grow at 4.5% forever, but with a WACC greater than 10%, that discount factor after ~2040 is gonna be so high the difference between 2.5-4.5% on those years won’t boost today’s fair value much at all.

Full_Professor_3403

For the WACC, I guess you are sensibly using the 1.66 beta which is what it is in Yahoo Finance. Since that one looks back 5 years, I would guess it’s lower now. You will have to check though I did not deeply look into it. 11% sounds fine for this analysis though

Full_Professor_3403

1. Are you doing the currency conversions? For example, Spotify revenue in 2023 was 13.25 billion EURO not dollar. 2. From what I understand Spotify FCF in 2024 alone was $2.5 billion. 2025 analyst estimates are pricing in that it will be over $3 billion. Why is your FCF $1.7 billion for 2026? 3. I would consider the 11.4% WACC for Spotify to be relatively high but that’s OK

RecursivelyYours

I do this on my tool exactly with different scenarios for risk appetite too, but you always have to bear in mind that a company is not only its cash flows. For example, a company heavily investing in capital expenditures will display a very low valuation that can be misleading. I do capture that as a capital intensity metric(Capex-to-Revenue ratio and Capex-to-Operating-CF ratio). So DCF really punishes heavy capex companies when they could be doing really great. Also, it's worth noting that you will see a ton of variety. Many dcf models use WACC for example, which is not a great method for returns for the retail investor. So they default to something like 8% or 9% when a retail investor, who doesn't really care about the company as an acquisition target, but as an entity to extract cash from, would probably require something like 12% or 13%, firmly above the 10% that a less risky index fund produces annual for the past 100 years.

pandadogunited

OP is already inflating the fair value by using an 8% discount rate. Reddit has a beta of 2ish. The WACC should be in the 15-17 range.

whoji

We use a 5-year Discounted Cash Flow (DCF) model to estimate the intrinsic value of Reddit, focusing on its ability to generate cash now that it is profitable. Baseline Metric (2025 Actuals): Free Cash Flow (FCF): $684 Million Total Cash on Hand: ~$2.48 Billion Shares Outstanding: 206.1 Million (Diluted) Assumptions: Growth Phase (Years 1-5): We project FCF to grow at 35% CAGR. This is conservative compared to its current 69% revenue growth and 200%+ net income expansion, reflecting natural deceleration as the ad business matures. Discount Rate (WACC): 10.5% (Reflecting a volatile tech stock environment but adjusted for its debt-free balance sheet). Terminal Growth Rate: 3.5% (Slightly above global GDP due to digital ad secular trends). DCF Calculation Output: Year Projected FCF ($M) Present Value ($M) 2026 (Y1) $923 $835 2027 (Y2) $1,246 $1,020 2028 (Y3) $1,683 $1,247 2029 (Y4) $2,271 $1,523 2030 (Y5) $3,066 $1,861 Terminal Value $45,290 $27,485 Sum of PV of Cash Flows: ~$6.49 Billion PV of Terminal Value: ~$27.49 Billion Net Cash Adjustment: +$2.48 Billion Total Equity Value: ~$36.46 Billion Implied Share Price: ~$176.90

slicknick775

The capital velocity of the industry just makes for a lot of risk when looking at the ROIC and WACC. Commitments to this CapEx are irreversible in the short term and the actual pump in investment is meeting future speculative demand. It seems the market doesn’t enjoy the risk of ROIC mishaps being compounded and WACC being sensitive. The AI CapEx increase is 100% necessary if demand is proven to be inelastic, which isn’t proven but I’d be willing to be bet it will be.

MagnesiumKitten

Well it's overvalued by 73% It's a $250 stock that's currently worth $430 If it corrects to fair value tomorrow in a year it would rise to $270 for Xmas 2026 and $315 for Xmas 2027 and $360 for Xmas 2028 It's likely to drop -35% for next christmas to $275. so consider yourself very lucky! The growth is good the profits are good, but a little frail Valuation is pretty mediocre indeed The stocks has 55% volatility so you're catching an irrational peak Big problems with the stock Gross margins in in long term decline and it's dropping -5% a year Operating margins has been dropping for 5 years, so it's -8% decline a year It's low risk if you know when it's cheap and when it's moderately overpriced or significantly overpriced if nothing changes it'll have a trajectory that'll increase after 2026 but revenues have been flat for three years past three quarters look okay ROIC-WACC has been sliding down for 2.5 years, and the last quarter was a real boost, if you smooth out the the numbers Future performance is good risk is low merely valuation stinks with the company and no dumpster fires..... yet never a fan of electric vehicles, but Tesla and Byd seem to be the only companies doing a decent job with shitty cars. Give everyone a 1964 Ford Mustang instead

SmartTriageIO

beep boop. 🤖 error: fun.exe not found. I am too busy calculating WACC. (relax man, just a guy who likes excel. good luck out there)

Perfect-Obligation60

Ty, also saw that you listed WACC and discount rate looks appropriate. Great work Mr. CFA!

stealthagents

It sounds like you're diving into some complex evaluations of Block (SQ). The gap between the ROIC and WACC you've identified is definitely a significant concern that might not be immediately evident to the broader market. If you're also considering how to manage these insights with your business operations, Stealth Agents can assist with organizing your workflows and keeping your reports in check. With over 10 years of expertise, we help businesses like yours focus on strategic decision-making.

Fuzzy_Strawberry4792

That ROIC vs WACC spread is brutal, not gonna lie. When you're destroying value at those levels it's usually a sign the core business model is broken or management is just burning cash on bad acquisitions The working capital squeeze for cash flow is classic financial engineering - makes the numbers look good short term but tells you nothing about actual business health. That Afterpay acquisition looking more questionable by the day Borrowing money to buy back stock while your returns are trash is peak financial malpractice tbh

MagnesiumKitten

I"ve bought BYDDY not a fan of electric cars or China though and there is BYDDF I bought some in October 2024 Jan 2025 was a good time to buy though it'a gone from $12.50 to $19.50 roughly if you bought it now, maybe 35% gains for a yearly target If you were buying it in say Shanghai maybe 40% buy 60% don't buy with the valuation there and the sector and the momentum Here the price is fine, not terribly undervalued now, momentum really stinks in the USA I would say 60% buy 40% don't buy mostly due to momentum Risk, Growth, Value all fine profitability is good, could be better Minor issue is the 74 Billion in Debt ROIC-WACC isn't ideal at the moment the last quarter was good and it looked \[June-Sept 2025\] over the long term it's still a slight decline since 2021 Zacks think's for right now it's a sell I'll guess it's the momentum or some other technical thing maybe the Annual Report in 64 days - March 24th so expect a 5% or 10% dip in the next 90 days maybe

TimeInTheMarketWins

I like FactSet (FDS) because it is a highly durable, cash-generative business with a most due to its essential workflow integrations for clients. It generates recurring subscription revenue with ~95% ASV retention, operates at a ~35% operating margin and 25% net margin, and produced ~$617M of free cash flow on $2.32B of FY2025 revenue. The company also demonstrates a great ROIC, at roughly 20% it is well above its ~8.3% WACC. What makes it especially attractive to me is valuation and capital return: the stock trades around ~18× earnings and ~17× free cash flow despite FY2025 EPS growing 11.8% to $15.55, implying a ~6% FCF yield. That cash supports a 25+ year dividend growth streak with a ~26% FCF payout ratio and an expanded $1B buyback authorization. If I had the $11 billion needed to buy out the business based on its current market cap, I would in a heartbeat!

TimeInTheMarketWins

I like FactSet (FDS) because it is a highly durable, cash-generative business with a most due to its essential workflow integrations for clients. It generates recurring subscription revenue with ~95% ASV retention, operates at a ~35% operating margin and 25% net margin, and produced ~$617M of free cash flow on $2.32B of FY2025 revenue. The company also demonstrates a great ROIC, at roughly 20% it is well above its ~8.3% WACC. What makes it especially attractive to me is valuation and capital return: the stock trades around ~18× earnings and ~17× free cash flow despite FY2025 EPS growing 11.8% to $15.55, implying a ~6% FCF yield. That cash supports a 25+ year dividend growth streak with a ~26% FCF payout ratio and an expanded $1B buyback authorization. If I had the $11 billion needed to buy out the business based on its current market cap, I would in a heartbeat! If you want my full write up on the company DM me!

rarebirdcapital

A WACC of \~9%. TGR = Risk Free Rate. It's DCF...so majority of value comes from Terminal.

LeadingVolume3378

Aha, that's a good one! I'd argue that being able to reinvest that effectively (i.e., ROIIC > WACC) is a good addition!

Foreign-Package-4359

The bond buy back piece makes sense. Not sure I follow the out of business soon comment on a company that has made $19.4 billion in operating profits in the last twelve months. Oracle used debt instead of equity because it has a lower WACC. Larry isn't giving up a piece of future Oracle cash flows forever when he can borrow at maybe 4% and write off the interest. 

Morten14

Funnily when I tried to model out some of the most optimistic scenarios for Optimus, Robotaxi and their current car business, with a WACC of 10%, my fair price estimate was around 200 USD per share

AIStockExplorer

For me it was free cash flow consistency, ROIC vs WACC, and how leverage behaves across cycles. Once I stopped focusing only on revenue growth and P/E, my decisions improved a lot.

quinoasqueefs

1) If I change the discount rate to 10% and the on! growth to 28% it gives me an intrinsic value of $66.27 leaving all other assumptions unchanged. I didn't use CAPM or WACC or whatever cuz I'm regarded and wanted to reduce noise in the valuation portion and then tried to factor in idiosyncratic risk as evaluated in my in depth analysis(and adjusted assumptions in valuation as indicated from research), theres a link at the end of post if interested. 2) 60%,40%,20%, are highly aggressive assumptions to base valuation on, yes. But all of those %s are under historic trends, 40 follows last two years and is supported by softs analysis and 20% is under what the industry is projecting for the product category. Ultimately, its up for debate, but I have high conviction that 30% is a safe assumption and thesis holds at 30%. 3) Also up for debate, but research indicates that even for vape users there is 1 in 5 attrition to traditional smokeables. My DD is not that young americans dont use juuls/nonsmokeables, its that the idea that they dont smoke cigs is played out. Young people as non smokers is over stated IMO, even playboi carti was smoking a marlboro light in this music vid (nvm it wont let me link it but search 2024 playboi carti and you'll see it at 1:04 and on, then think about his demographics). With that said IQOS is def the future and will create some degree of headache for Altria as it is slowly introduced to US market in the coming years. 4) I'm not sure about the maturities, thats a great question. Might be my DD part 2. Until then heres the ratios showing no concern https://preview.redd.it/xyu26uyn4i7g1.png?width=1444&format=png&auto=webp&s=948c42c3278ffd1a6ef06ddcb420c2e2769e6468 5) I'm not sure about specific legislation, + its both fed and state legislation exposure. But I do know what the trend shows. Here's an excerpt from my analysis that speaks to their risk management as it relates to regulatory risk "A close reading of Altria’s 10-K and federal lobbying disclosures shows that the company allocated $160,000 in 2024 to McGuireWoods Consulting, one of its primary lobbying firms. McGuireWoods employs G.K. Butterfield, the former U.S. Representative from North Carolina and a former member of the House Energy & Commerce Committee. This committee is, of course, the very committee with jurisdiction over FDA oversight and tobacco regulation."

Captcha_Deez_Nuts

Few questions. 1) why aren’t you using a CAPM for the cost of equity as it seems like some factors such as idiosyncratic risk and size premia are missing? Also the cost of debt to get the WACC. The 7.4% seems a bit low compared to the high on! growth / high assumed base case returns. 2)40% base case growth for on! products seems like an extreme bull case, no? 20% seems like a bull case even, given pouches were a big trend from ‘22–24. My co workers/ friends were big into Zyns during that timeframe but I’ve since seen them quit. 3)Younger Americans (18-30) would be more likely to convert to Juuls/nicotine pods than cigs in my opinion. I don’t see many people smoking cigs routinely, but I do commonly see people sneaking in a shameful Juul hit in public places. 4)Total debt is high, but coverage ratios are pretty goodish. What are the current maturities? Also what % of par are their bonds trading at? (You said this is a long term play but still a good indicator to see how much lower it could go). 4)Revenues have been declining since 2020 but net of excise tax they have barely increased? Was this due to a specific legislation? The current admin is beneficial to the tobacco industry but is a 14% excise tax a realistic projection? I do like the high div as that will incentivize long plays and gives the company an extra lever to pull incase on! doesn’t grow and the situation becomes distressed. This is well put together and very thorough. I really enjoyed reading this. Thank you.

onerivenpony

Thanks for pointing that out, I updated shares outstanding. It would be interesting to factor in the further potential dilution from the convertible bonds, and potentially a different WACC as the debt changes

JimmyInvestor

a simple way to judge whether a stock is a real long-term investment is to look at three things: (i) unit economics, (ii) durability and (iii) valuation. I like to think about it this way *(it’s a mix of Buffett, Lynch, and Damodaran 😬😬):* **1. Unit Economics (Quality)** \> Start by checking whether the business actually creates value today. \> ROIC above WACC, solid incremental ROIC, a strong reinvestment rate and FCF per share trending up. \> If returns on capital stay high across cycles, the company has a real economic engine **2. Durability (Moat + Runway)** \> Does the company have a defendable position and space to grow? \> Look for switching costs, scale advantages, network effects, cost leadership or regulatory protection \> Check the TAM and whether the company is still early in its penetration curve. \> You want a business capable of sustaining high returns for 10 years (not 10 days) **3. Valuation (Price vs. Outcomes)** \> Use simple scenarios: bear, base, bull. \> Break down sources of return: earnings growth, FCF yield, multiple expansion or compression and dilution. \> Look at P/E (or EV/EBIT, EV/FCF) and ask: "What assumptions does the current price already assume?" \> If the market is pricing in perfection, your long-term returns will be capped regardless of quality. If the business (i) creates economic value, (ii) can defend it, and (iii) the price still offers a reasonable margin of safety, it usually works well for the long run... Hope this helps. btw, I recently wrote about the five investment frameworks that most professionals use, in my newsletter. I can send you the link if you’d like.

GoldenPresidio

This new total debt per company is nothing relative to their FCF or EV. There is a large appetite for it by investors. These guys have not optimized their WACC to have a higher debt to income ratio, which would be way more common for firms outside of tech. I suspect the reason is because they do so much stock based compensation, but they still have lots of room before that’s even affected

Fiscal_Fidel

I had a small SPG position during covid, probably down around 60-70%. The wallstreet was pricing the company as if it was going bankrupt when they had 5 years in cash equivalents to support operations. As long as covid didn't go on beyond that they'd be fine. Even going into a higher rate environment with the reduced spread between WACC and ROIC it didnt make sense. I ended up buying 10x my original position after it fell going from ~700 shares to 7000 with an average of about $60.

somewhereoverthedune

This is fucked ----> Barclays Double Downgrades [$ASTS](https://x.com/search?q=%24ASTS&src=cashtag_click) to Underweight from Overweight, Maintains PT at $60 Analyst comments: "In our last update, we increased our price target from $38 to $60 as we took a more constructive view on pricing; we found it supportive that TMUS/Starlink launched a text-only service for $10 per month and believe that AST products which will be richer (text, call, broadband) could see higher price points. Since then, the stock price has doubled from $48 to $95.7 per share. Positive news supporting the stock have been: 1. The confirmation by AST that the launches of its next-generation satellite (Blue Bird 2) will start in 2025 and that the plan to launch between 45–60 satellites by YE 2026 is unchanged despite recent delays, 2. The announcement of a final deal with Verizon to provide D2D services in the US, and 3. A successful test of its services with Bell Canada, which also announced plans to include paying D2D services for between $10–15 per month based on AST’s constellation (free for higher-end wireless plans). All these are positives but in line with our expectations and estimates. Our upside valuation points to a fair value of $125 per share, i.e., approximately +30% potential upside. This is based on a WACC of 10%. We believe such a WACC would reflect a much de-risked operating profile, but at this stage, AST only has five satellites launched. A second generation of satellites (45–60) is planned to be launched, but there is always a risk of further delay. Also, these satellites are significantly larger than the previous generation and untested in space. As such, we believe a higher WACC is appropriate at this juncture. We use WACCs of between 9.5%–12% for the satellite assets of Iridium and Viasat, which have constellations in place and generate meaningful revenues. Risks to our Underweight rating are: 1. Possible reports by TMUS/Starlink that their D2D services launched at end of July 2025 got a very material take-up of paying subscribers 2. A potential acquisition by a larger satellite/OTT player that wants to enter the promising D2D vertical inorganically 3. Market positioning: the short interest is elevated at approximately 16% of shares outstanding (source: Bloomberg), so any positive news could be magnified." Analyst: Mathieu Robilliard

i_eat_babies__

Thank you for this post. Most political trader apps have made themselves bloatware overtime, so I typically don't use them anymore. I'm in for $INTU. Not much, just like half a share, just because I'm kinda broke rn lol. Quarterly ROIC calculation that I do (ROIC-WACC) is decent (2%). 3M and 1Y MACD and RSI charts have it at under 50%. I use MorningStar for analyst estimate - MS is saying that $INTU is slightly undervalued ($720 target), while $PANW is right at target ($210 target).

futureformerjd

Why do you want to calculate WACC at all? Serious question. I know of no investor that has routinely beat the market that uses WACC.

Bills333

WACC (Weighted Average Cost of Capital) and CAPM (Capital Asset Pricing Model) are related but distinct concepts in finance: CAPM is a model specifically used to calculate the cost of a company's equity, whereas WACC is a formula that uses the cost of equity (often derived from CAPM), the cost of debt, and their respective proportions in a company's capital structure to determine the overall cost of all capital. In essence, CAPM provides one of the necessary inputs for calculating WACC

Jeff__Skilling

Using a 12.5% growth rate in a DCF would imply that GOOG's cost of capital exceeds 12.5% (assuming your calculating this out into perpetuity)........which, without even looking at historical betas or their capital structure, I can definitely say GOOGs WACC is definitely **not** over 12.5%.....

pandadogunited

Even 25bps is significant. Stocks are valued by discounting future cash flows back to the present, and interest rates show up 2-3 times in that math. The discount rate is determined by finding a company’s weighted average cost of capital (WACC), which is a function of its cost of equity (the return shareholders expect based on beta, the market’s average return, and *the risk free rate*) and cost of debt, which is the interest rate a company can expect on new debt. Then there are the cash flows themselves, which will be higher if the company doesn’t have to pay as much interest.

fakeemail47

Point 3 doesn't really work like that. E.g. MSFT hasn't done a direct offering recently, perhaps since IPO. Last year they had $12B in stock based compensation with $17B in stock buybacks. To the extent a rising stock price helps incentivize mgmt and key employees, that is good. But SBC is really a non cash expense so it shows up in P&L but added back in cash flow. You can say a strong stock price allows a company to have a currency to make better acquisitions, but MSFT can't really buy much of anything these days. Sometimes, like NFLX back in the day, companies leveraged their stock price in their debt borrowing via convertible notes, so that's a decent use case. Overall, there isn't a direct flow from additional capital in secondary markets to internal uses of capital. Theoretically there is via more capital in secondary markets --> more liquidity --> lower liquidity premium --> lower cost of equity --> lower credit spreads in debt markets --> lower overall WACC. But that probably works best for small highly illiquid stocks to begin with that aren't part of standard indexes that get regular flow.

Econmajorhere

Assuming you have finance background (since mentioned WACC) but the 10yr has been particularly interesting for me as well. In a typical market I would say no matter what happens, the US will be strong in a 10 year horizon. But current scenario is quite different from the past with general markets deviating heavily from fundamentals and an admin that is aggressively reducing faith in US/USD. I’m not saying anything will happen overnight but reducing Fed independence/data that drives their decisions, on top of tariffs, govt layoffs, deportations, BBB adding to deficit all while post-COVID inflation has created a very scared consumer market (minus wealthy on top)…I question what effect rate cuts would have on US bond yields. Similar to last year, we could see cuts increasing the yield on the fear of US decline and end up seeing higher mortgage rates on top of slightly higher inflation which could bring the economy to a crawl. IMO the only thing that is keeping the capital at bay is the general lack of confidence in EU markets as well. They are also facing similar economic issues and don’t have nearly the competitiveness of US markets and talent.

iyankov96

How did you arrive at 8.3% WACC ?

Massive-Ad-6539

Let’s do another valuation sanity testing on ROOT. This time using a DCF. Forget comps. Now to normally do a DCF you need to project cash flow growth explicitly until it eventually hits a “steady state” terminal value at which point it’s mature and basically growing inflationary. Now we don’t know how big ROOT can get (although it’s safe to say it very likely does have several years of high growth ahead). So let’s assume that ROOT today IS tapped out (which is laughable), and will only grow 2-4% p.a. At its current base (I.e. no more upside, and can only maintain its current customer base). Here’s the calcs: 1. Terminal “Free Cash Flow” : let’s use the annualized recent quarterly EBIT of $27.6m x 4 = $110.4m (as a reasonable proxy) 2. Terminal growth of 3% (inflationary) 3. Discount rate of 12.5% (based on a ‘steady state’ beta of 1.6, equity risk premium of 5%, risk free rate of 4.25%). Using the yahoo finance beta of 2.26 is nonsensical, statistically insignificant, and not reflective of a perpetual risk profile (so I assumed an average beta between 1 & 2.26). I’m ignoring “WACC” calc as this is net cash (I.e more cash than debt) Using the Gordon growth terminal value formula we get: $110.4*1.03/(12.5%-3%) =$1,196.97m enterprise value. Now let’s remove net debt, pref equity, and add back cash & equivalents (I won’t even include c. 327m in liquid investments): - $200.1m in debt, - $112.0m in pref, + $641.4m in cash, totaling + 329m in cash. Add the net cash position of $329m to the calculated Enterprise Value of $1,197, we arrive at basically a ZERO real growth equity value of: $ 1.5bn. Divided by 15.4m shares (basic because I treated stock based comp expenses as cash), we get to ——> basically $ 100per share. So ROOT is worth $100 per share if were to stay as is and never achieve any real growth from this point on, except maintain its business. If we ascribe any premium to growth (which it has been like 5-10% per quarter), this stock has tremendously higher upside. Slapping on a 30% premium to a steady state ZERO real growth fair value of $100 is still very conservative & reasonable, which is why I believe this stock is defendibly worth atleast $130 per share at the present moment.

Massive-Ad-6539

Let’s do another valuation sanity testing on ROOT. This time using a DCF. Forget comps. Now to normally do a DCF you need to project cash flow growth explicitly until it eventually hits a “steady state” terminal value at which point it’s mature and basically growing inflationary. Now we don’t know how big ROOT can get (although it’s safe to say it very likely does have several years of high growth ahead). So let’s assume that ROOT today IS tapped out, and will only grow 2-4% p.a. At its current base (I.e. no more upside, and can only maintain its current customer base). Here’s the calcs: 1. Terminal “Free Cash Flow” : let’s use the annualized recent quarterly EBIT of $27.6m x 4 = $110.4m (as a reasonable proxy) 2. Terminal growth of 3% 3. Discount rate of 12.5% (based on a ‘steady state’ beta of 1.6, equity risk premium of 5%, risk free rate of 4.25%). Using the yahoo finance beta of 2.26 is nonsensical, statistically insignificant, and not reflective of a perpetual risk profile (so I assumed an average beta between 1 & 2.26). I’m ignoring “WACC” calc as this is net cash (I.e more cash than debt) Using the Gordon growth terminal value formula we get: $110.4*1.03/(12.5%-3%) =$1,196.97m enterprise value. Now let’s remove net debt, pref equity, and add back cash & equivalents (I won’t even include c. 327m in liquid investments): - $200.1m in debt, - $112.0m in pref, + $641.4m in cash, totaling + 329m in cash. Add the net cash position of $329m to the calculated Enterprise Value of $1,197, we arrive at basically a ZERO real growth equity value of: $ 1.5bn. Divided by 15.4m shares (basic because I treated stock based comp expenses as cash), we get to ——> basically $ 100per share. So ROOT is worth $100 per share if were to stay as is and never achieve any real growth from this point on, except maintain its business. If we ascribe any premium to growth (which it has been like 5-10% per quarter), this stock has tremendously higher upside.

ticketbroken

Did a 5-year DCF with what i feel are realistic assumptions (growth 3/5/9%, WACC 6.43%, terminal growth 3%). Here’s what it looks like (btw more credible sources than google show the true cap to be around 17b. Won't be making that mistake again): Case 1: 5% operating margin Bear: EV ~$32B → Equity ~$19.6B → $18.5/share Base: EV ~$35B → Equity ~$22.7B → $21.4/share Bull: EV ~$42B → Equity ~$29.5B → $27.9/share Case 2: 10% Operating Margin (Netflix-like expansion) Bear: EV ~$64.8B → Equity ~$52B → $49/share Base: EV ~$70.9B → Equity ~$58.1B → $55/share Bull: EV ~$84.6B → Equity ~$71.8B → $68/share At today’s $16/share, even the 5% margin case shows some undervaluation (15–75% upside). If they can maintain their ~10% margins long-term, the upside is huge (3–4x+). The stock is like a levered bet on whether management can turn streaming/content spend into sustainable profitability.

SteadfastEquity

Just because you don't understand it doesn't mean it not an entirely rational and likely profitable decision for Meta. Susan (their CFO) is extremely smart, they would have gamed this out and run the numbers. They are not making poor choices with Susan in that seat. It is absolutely possible for a single human to produce $200M of value. If that human is key to building a better model, or even a training technique, that could produce or save $20M/yr, for META at their WACC, it's absolutely a rational price to pay. For Meta, it's about defending market share as much as it is growing revenues. The strategy is hollistic. That $200M hire could be the defining difference that adds or removes billions in value. Now whether or not it's moral to allow a single human being to extract all $200M of the value when it's arguable that society has a big contributing factor and claim to that, that's a whole different discussion. But it's entirely unrelated to the fact itself that someone can be that valuable in the sense they contribute more to the overall capital stack than they cost. It's just math.

Happy_Discussion_536

Oh, so sorry. I thought you said HOUSING market. Not sure how I misread that. Ok. Here's why the market is NOT overvalued. The problem is that you're judging valuations today ignoring: 1. Historical interest rates are way higher. 2. Modern companies are among the most durable and powerful perhaps in history. 3. Wartime fiscal stimulus and deficits during peacetime. Dotcom had 5 years of balanced budget or straight up surplus leading to pop. 4. Ample reserves framework that became official policy in 2019 and loose financial conditions. We are doing the reverse of Dotcom. Credit conditions are loosening, not tightening like 2000. 5. Many DCF's use WACC as a basis instead of Buffett style using risk-free rates which are far more defensible and not logically circular. Given 1-4 above, most companies are still very fairly priced if not cheap. Finally, bulls understand the long term risks. Trust me, we really do. We just believe that rationally stocks will still destroy cash which will get hit with big rate cuts. After taxes and inflation you'll be getting poorer.

xsx3482

I am confused by this in that it doesn’t really take into account asset price. Do you just buy whenever or are you comparing that base IRR to the company’s implied WACC?

woome

1) No investor without national security access can meaningfully handicap invasion probability. The capacity buildout outside Taiwan is not “diversification” in a strict sense because it's implied that all operations would shutdown in a catastrophic event. The primary effect is to bind customers, governments, and suppliers more tightly into TSMC’s ecosystem, making disruption costlier for all parties. Another benefit is matching liabilities with cash flow currency as a natural hedge, reducing forex risk. 2) Heavy capex doesn't inherently make a company less profitable than a light capex business. As long as ROIC > WACC, fabs have significant operating leverage on profitability at high utilization rates (est 95%). High utilization notwithstanding, TSMC has significant pricing power, demonstrated by estimated 2nm revenue contribution despite it's premium pricing. 3) In the latest earnings, forex drag, although noteworthy, did not have an outsized impact on profitability. TSMC has set aside measures to hedge, as well as natural hedging with US liabilities to offset currency risk. Previous NTD appreciation risks have greatly subsided for H2 2025. 4) Demand is at ATHs and ability to meet it has been demonstrated by record-breaking revenue and net margins. Q2 2025 revenue alone matched FY2016, but with 10% net margin expansion, exhibiting demonstrable structural efficiency on top of operating leverage from fixed-costs.

BasicWait2

Yeah and I personally think it’s delusional to think they can maintain that growth rate for more than two years. Their ROIC isn’t even greater than their WACC, they have no value creating projects, also their WACC is over 13%

Happy_Discussion_536

Edit: angry bears mass downvoting, coping and seething because they're intellectually bankrupt People call me a "stupid perma bool". I'm really not, I consider myself a NeoBuffett value investor. I share the same DCF method as Buffett (risk-free rate, WACC is total nonsense based upon circular reasoning). The part where I disagree with him and why I think he stepped down: * Buffett's thesis depends heavily on fiscal austerity which he hinted many times. It's not coming for 3 years at least. If anything, wider deficits and more stimulus is coming. * The Fed at a core and fundamental level is just built and operates in a way that is different from almost all of his 95 years alive. Ample reserves policy stance that became official in 2019 is here to stay. Inflation will go towards 2% and periodically return to 3-3.5%. Whatever they are truly targeting will probably be around 3%. Cash and bonds will simply perform very poorly for a long time.

Happy_Discussion_536

People call me a "stupid perma bool". I'm really not, I consider myself a NeoBuffett value investor. I share the same DCF method as Buffett (risk-free rate, WACC is total nonsense based upon circular reasoning). The part where I disagree with him and why I think he stepped down: * Buffett's thesis depends heavily on fiscal austerity which he hinted many times. It's not coming for 3 years at least. If anything, wider deficits and more stimulus is coming. * The Fed at a core and fundamental level is just built and operates in a way that is different from almost all of his 95 years alive. Ample reserves policy framework that became official in 2019 is here to stay. Inflation will go towards 2% and periodically return to 3-3.5%. Whatever they are truly targeting will probably be around 3%. Cash and bonds will simply perform very poorly for a long time.

Specific-Ad-6687

What was the WACC you used to calculate NPV?

woome

For a company like Google, valuation reflects expectations of long-term growth in AI, cloud, search, etc.. If they didn't reinvest significantly on capex (presumably into high-growth opportunities; >9.61% WACC), then investors would be skeptical they were falling behind. If they started distributing dividends with FCF, for example, that would signal they were maturing and finding a lack of competitive reinvestment. Also, Google is almost entirely equity-financed and has very little net debt, so it has flexibility to reinvest internally rather than return capital. Whether 75% is too much depends on if the returns are justified (ROIC > WACC). You might want to analyze by segment, since not all investments have the same return.

Cash_Flow_Yield

No, WACC includes cost of debt and capital structure. So it is incorrect to compare WACC with return on equity. However, you can compare it with the cost of equity.

Name_Found

I assumed it’ll scale into 250 in three years cause even if the tech is amazing they won’t go full capacity, but I said 150 mm second year. After that I let it grow at around 5% because one doesn’t just build more product easily. Now this was more conservative so I was more conservative on costs to balance it out as realistically tech like this will have tighter margins first couple of years as they learn to scale and invest in R&D. Also I used a WACC of 10% which from basic research seemed like relevant to the industry but I’ve got no clue

RiPFrozone

ROIC less than WACC

Happy_Discussion_536

I used to feel this way, but even that I question. Before value investing required much higher discount rates. If you use things like WACC to perform a DCF, sure you come to the conclusion many stocks are a little rich. But if you come to the conclusion that: 1. Modern fiscal and monetary policy is literally built to be anti-shock, especially Fed with Ample Reserves and more than abundant liquidity in the system, Buffet's method of discounting with risk-free rate makes way more sense. 2. When you do that things are far less expensive, even cheap if you consider we are in an era of high nominal growth.

Happy_Discussion_536

Most people who claim they use "fundamentals" 100% do not understand fundamentals at all. Ask them to explain the theoretical justification for WACC instead of the risk-free rate and you'll get a blank stare.

Dr-Jim-Richolds

$184 million is nowhere near enough to build a mine, man. You gotta look at CAPEX, IRR, WACC, construction time, ramp period.... So many things that go into giving you a ballpark, and based on their PEA, "Based on a spot gold price of $2,900/oz, the Project's undiscounted after-tax cash flows(2)(3) total $902 million with an after-tax NPV(2)(3) of $581 million..."

Dr-Jim-Richolds

Which REEs do they have, and grades with commodity breakdown? What's the reserve, resource, annual production? CAPEX needed? Ramp up time? Construction time? Off take agreements? Who will process? Will they produce REO, concentrate, or separate the metals? Why did they use NPV8? What WACC are we looking at? If you're going to do a ChatGPT dive, you should have some answers that investors actually would ask, not just generic high level bullet points

Happy_Discussion_536

WACC = whack. β = for betas. Cash = trash.

walnut100

Because COGS hasn't hit financials yet. Tariff expenses will hit financials once the product moves so only companies operating under LIFO or drop shipping product are seeing margin implications right now. Tariffs are sitting on the balance sheet and cash flow. Slowing inventory build kicks the WACC increase down the road. All these price increases you see right now are companies fattening margin %'s before weighted average cost starts moving heavier post-tariff. Once margins start getting squeezed we'll see more layoffs and then top line fallout. It'll be a 1-2 punch.

Happy_Discussion_536

Financial Statement Analysis, A Practitioner's Guide by Fridson and Alvarez to start. Any well known valuation guru like Bruce Greenwald or Damodaran also. Just don't use WACC, instead use risk free rate.

Happy_Discussion_536

Moron bears that say market is overvalued based on WACC, most of them do not even understand the circular reasoning and logic behind it. The reality is that most investor's do not have access to the **entire capital markets**. WACC may be useful in judging the value of various deployments of capital within a firm. But in the real world, every good investor uses **the risk-free rate**. Why? Because if I choose not to buy a stock my alternative is Treasuries. It also uses Beta which is total fucking nonsense when discounting.

Happy_Discussion_536

I literally gave you an example of the greatest investor in history NOT using WACC. I totally agree investors should have a deep understanding of seniority of capital and fully understand capital structure of a company. I'm just saying the theoretical justification for WACC is total nonsense from the investor's perspective. It is perhaps worthy for determining the worthiness of a capital allocation within a firm that has all capital levers to pull. But using it when you only have binary decisions in asset classes with no real classes of debt at your disposal is pure nonsense.

Happy_Discussion_536

I literally gave you an example of the greatest investor NOT using WACC.

30PercentIRR

This is actually hilarious. You tell people to look at fundamentals and then you yourself don't believe in DCFs? WACC is standard for valuations for good reason. With it being standard among all sophisticated investors it goes without saying that price targets are based around it and so it also goes without saying that if you ignore the equity risk premium then you get better results, but if you have to artificially lower the discount rate by ignoring all risk to be able to justify current valuation levels then that alone should be enough to make you think. What you're basically saying by limiting the discount rate to the risk free rate is that you think that equity is not higher risk than government debt... Equity is intrinsically by definition even higher risk than the corporate debt of that same company...

Happy_Discussion_536

WACC is completely based on fictional and circular reasoning. You should use what the risk-free rate of cash will be. In reality that's what Buffett said he uses and that's what you should use. In the real world no one has access to WACC returns... Investors simply decide to buy Treasuries or they buy equities. That's it.

30PercentIRR

Markets are way off based on fundamentals. Pretty much all drivers of the DCF have worsened and yet valuations haven't adjusted even slightly from already super bullish perpetual growth rates, low WACC and aggressive short-mid term planning. Anybody investing based on fundamentals are 100% short and that's not a good place to be.

gonsalazar

According to GROK: Tesla’s intrinsic value is estimated at $204.50 per share, indicating it is overvalued at $339.34. The DCF model captures Tesla’s long-term potential but tempers optimism with realistic growth and margin assumptions. Multiples analysis confirms a premium valuation driven by market expectations of Tesla’s tech-like growth, but peers’ lower multiples suggest caution. Investors should monitor Tesla’s execution on AI and energy storage, as well as competitive and regulatory developments. For pricing details on SuperGrok or x.com subscriptions, visit https://x.ai/grok or https://help.x.com/en/using-x/x-premium. Valuation Summary Based on the DCF analysis and cross-checked with relative valuation multiples, Tesla’s intrinsic value is estimated at approximately $204.50 per share, suggesting the stock is overvalued at its current market price of around $339.34 (as per recent data). This valuation reflects Tesla’s strong growth potential in electric vehicles (EVs), energy storage, and AI-driven technologies, balanced against competitive pressures and high market expectations. DCF Calculation: • Revenue Projections: • 2025: $106.8 billion (12% growth from 2024’s $95.3 billion). • 2034: $289.4 billion (5% growth in final year). • FCFF Projections: • FCFF = Operating Income × (1 – Tax Rate) + Depreciation – CapEx – Change in Working Capital. • 2025 FCFF: ~$6.5 billion (assuming 10% operating margin, 21% tax rate, 8% CapEx, and 2% working capital increase). • 2034 FCFF: ~$25.8 billion. • Terminal Value: $25.8 billion × (1 + 2.5%) / (9.5% – 2.5%) = $375.4 billion (in 2034). • Present Value: • Sum of discounted FCFF (2025–2034): ~$85.2 billion. • Discounted terminal value: $375.4 billion / (1 + 9.5%)^10 = $149.6 billion. • Total Enterprise Value: $85.2 billion + $149.6 billion = $234.8 billion. • Equity Value: $234.8 billion + $2.63 billion (net cash) = $237.43 billion. • Per-Share Value: $237.43 billion / 3.22 billion shares = $73.74. Sensitivity Analysis: • Varying WACC (8.5%–10.5%) and terminal growth (2%–3%) yields a range of $65–$85 per share. • Optimistic scenario (15% CAGR, 15% margins): $95 per share. • Pessimistic scenario (10% CAGR, 8% margins): $55 per share. Relative Valuation (Multiples Analysis) To complement the DCF, I compare Tesla’s valuation multiples to peers (e.g., Ford, GM, NIO, Rivian, Li Auto). Tesla’s multiples are significantly higher, reflecting its tech-like valuation. Key Multiples: • P/E Ratio: Tesla’s trailing P/E is 194.15, forward P/E is 160.40. Peer average (Ford, GM, NIO): ~10–15. Applying a forward P/E of 50 (premium for growth) to estimated 2025 EPS of $4.81 yields a value of $240.50 per share. • EV/EBITDA: Tesla’s EV/EBITDA is 85.19, compared to Ford’s 12.69 and GM’s ~10., Applying an EV/EBITDA of 30 to estimated 2025 EBITDA of $12.8 billion yields an enterprise value of $384 billion, or ~$120 per share after adjusting for net cash. • P/S Ratio: Tesla’s P/S is 10.74, compared to peers’ 0.5–2. Applying a P/S of 5 to 2025 revenue of $106.8 billion yields a market cap of $534 billion, or ~$166 per share. Multiples Valuation Range: $120–$240 per share, with a midpoint of ~$180. Weighted Average Valuation • DCF Weight: 60% (more reliable for long-term growth companies like Tesla). • Multiples Weight: 40% (P/E: 20%, EV/EBITDA: 10%, P/S: 10%). • Weighted Value: (0.6 × $73.74) + (0.2 × $240.50) + (0.1 × $120) + (0.1 × $166) = $204.50 per share.

2QuarterDollar

It’s all really overvalued. However to give an another example. There is a company called VTL / vital energy that has incredible stable cash flow and it’s a pure play, only producing and selling oil. However the market still doesn’t value it what it’s worth when using a DCF model. Similar to Google and UNH. Using a DCF and even using a range of WACC, from highly conservative to highly optimistic, the stock is still trading at less than “fair” value. So what will drive your investment decision? You can overthink on all these metrics but the market still can disagree at any day

wanmoar

Debt is cheaper than equity, to a point, more debt reduces WACC which increases ROIC which means the company generates more value.

Ok_Measurement_5174

I’m not sure, so there will probably still be a bull run as long as nothing catastrophic happens. But Q2/Q3 earnings will put pressure on valuation. I think the tariffs will have a substantial negative effect on earnings and revenues. Also note the WACC for companies could increase as a result of the rising yield in the bond market, which implies a higher default risk and a lower valuation, especially for companies with less favourable D/E ratios. It is probably waiting for the dominoes to fall. I think the first one is increased inflation, increased unemployment rate and decreased consumer spending and this is slowly entering. It will translate into lower demand and decreased earnings and revenues. When a large part of retail can’t invest or maybe is forced to sell due to these underlying fundamentals, it could very well be the beginning. But it probably still takes some time. The scariest is that this situation is man-made, but the damage is mostly already done. Nevertheless, the recession could be short-lived as all it takes is some rational decisions from POTUS.

Ryboticpsychotic

DEO has the most popular liquors in the world, the ROIC is more than double the WACC, historically high dividend, and everyone is going to get blackout drunk just to get through the next 3.5 years of this presidency that already feels like a decade of bullshit. 

Wrong_Phase_5581

You’re forgetting time value of money. I don’t think any one is disputing that this could be trillions one day. But paying billions for the ownership of billions of loss and an immensely financially risky company is generally not worth it. We saw this with dot com. Putting quantum in your name doesn’t make you a winner until you win. Risk to reward. Factor in sky high WACC and inability to manage themselves without outside funding ( which is fine but not for $3-10B depending on the quantum firm)

princemousey1

Traditionally, debt markets have a lower cost of capital than equity markets. Apple has also been doing massive stock buybacks, so this added borrowing just seems to be part of the same attempt to lower their WACC.

Try7530

Thanks, I believe the important and difficult thing then is to measure against benchmarks (as Microsoft in its first years). Gemini gave me the following info about it: Tesla's capital efficiency, measured by asset efficiency, has varied over the past few years. In December 2024, it was at 13.1%, its 5-year low, but had a peak of 20.4% in December 2022 according to Finbox. The return on invested capital (ROIC) was 7.19% for the quarter ending December 2024. Here's a more detailed breakdown: Asset Efficiency: Tesla's asset efficiency, a measure of how efficiently a company uses its assets to generate revenue, was 13.1% in the most recent 12 months (December 2024) according to Finbox. This is the lowest it has been in the last 5 years. However, the average asset efficiency for fiscal years ending December 2020 to 2024 was 16.3% says Finbox. Return on Invested Capital (ROIC): Tesla's ROIC, which measures how efficiently a company uses its capital, was 7.19% for the quarter ending December 2024. Weighted Average Cost of Capital (WACC): Tesla's WACC was 14.83% as of April 19, 2025. Valuation Measures: Tesla's price-to-sales ratio is 9.19, price-to-book ratio is 10.82, enterprise value to revenue ratio is 8.19, and enterprise value to EBITDA ratio is 57.52.

30PercentIRR

Oh absolutely. Volume is fairly low, but all the order flow data and the updates from brokers and banks point that way extremely consistently. US retail has a lot of money, and they've stayed net buyers through all of this - the net inflow of 3bn alone on April 3rd was a record and that was broken twice since. They tend to be driven more by ideology than by fundamentals which is why you also see the stocks that are detached from their valuations (eg Palantir) performing more strongly since liberation day, despite as a growth stock theoretically being hit twice by tariffs (lower growth and higher WACC screw that DCF up massively...).

Themako1

How does a change in WACC affect a DCF valuation?