Calculating The Intrinsic Value Of Savor Limited (NZSE:SVR)
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Using the 2 Stage Free Cash Flow to Equity, Savor fair value estimate is NZ$0.20
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With NZ$0.20 share price, Savor appears to be trading close to its estimated fair value
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Savor’s peers are currently trading at a discount of 54% on average
In this article we are going to estimate the intrinsic value of Savor Limited (NZSE:SVR) by taking the expected future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Before you think you won’t be able to understand it, just read on! It’s actually much less complex than you’d imagine.
We generally believe that a company’s value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
See our latest analysis for Savor
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. To begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company’s last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today’s dollars:
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
2032 |
2033 |
2034 |
|
Levered FCF (NZ$, Millions) |
NZ$2.13m |
NZ$1.75m |
NZ$1.55m |
NZ$1.44m |
NZ$1.39m |
NZ$1.36m |
NZ$1.35m |
NZ$1.36m |
NZ$1.38m |
NZ$1.40m |
Growth Rate Estimate Source |
Est @ -26.41% |
Est @ -17.59% |
Est @ -11.41% |
Est @ -7.09% |
Est @ -4.07% |
Est @ -1.95% |
Est @ -0.47% |
Est @ 0.57% |
Est @ 1.30% |
Est @ 1.80% |
Present Value (NZ$, Millions) Discounted @ 11% |
NZ$1.9 |
NZ$1.4 |
NZ$1.1 |
NZ$0.9 |
NZ$0.8 |
NZ$0.7 |
NZ$0.6 |
NZ$0.6 |
NZ$0.5 |
NZ$0.5 |
(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = NZ$9.2m
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