Thursday, 19 June 2014

Facebook: Cashflow based Valuation

Assumptions:

  •   Facebook (NASDAQ:FB) will grow at CARG of 25% for the next five years. Historical growth of the company, emarketers report, and the consensus analyst growth projection data are used to derive this  growth  rate.
  • Standard CAPM assumption as it is used to drive cost of equity.
  • Growth of CAPEX will slow down in the next few years.
  • NASDAQ composite returns are a near approximation for market returns.   
Source: FocusEquity estimates


Comments:

In the light of this valuation, Facebook (NASDAQ: FB) is trading rather cheaply. Its stock has the growth-potential of around 30%; presenting investors with a decent capital-appreciation opportunity.