Verizon ($VZ) announced positive third-quarter results this week.  Analysts have been generally impressed.  How does the current share price look from an intrinsic value perspective?

Valuecruncher valuation model of $VZ with interactive assumptions

Valuecruncher produces a valuation of US$37.77 for $VZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 23.8% above the current share price of US$30.50.

Assumptions

• Revenue: Reuters aggregates 22 analysts covering $VZ and these analysts have mean estimates of 2008 and 2009 revenues of US$97.0 billion and US$103.3 billion respectively. For our analysis we have used US$97.0 billion in 2008, US$103.0 billion in 2009 and US$105.0 billion in 2010.
• Profitability: We have used an EBITDA margin of 32.0% in 2008 rising to 33.0% in 2010. Reuters has $VZ‘s EBITD margin at 32.7% last year and 34.4% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of US$17.5 billion per annum moving forward.
• Discount Rate: 9.0%.
• Terminal Growth Rate: 1.5%.

Our analysis incorporates the cash and debt the $VZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

Tags: VZ

This entry was posted on Thursday, October 30th, 2008 at 1:05 am and is filed under Verizon. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.