Running The Numbers – Yahoo ($YHOO) trading below intrinsic value
$YHOO has had a horror run since rebuffing Microsoft’s ($MSFT) takeover offer at US$31 a share. Today $YHOO closed at US$12.86 – just above 40% of the $MSFT offer (from 31 January 2008).
Valuecruncher valuation model of $YHOO with interactive assumptions
Valuecruncher produces a valuation of US$17.62 for $YHOO. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 37% above the current share price of US$12.86. This valuation of $YHOO focuses on the core business – we have ignored the investments $YHOO holds in Alibaba, Yahoo Japan and G-Market.
Assumptions
Revenue: Reuters aggregates 25 analysts covering $YHOO and these analysts have mean estimates of 2008 and 2009 revenues of US$5.69 and US$6.42 billion respectively. For our analysis we have used US$5.50 billion in 2008, US$6.15 billion in 2009 and US$6.75 billion in 2010.
Profitability: We have used an EBITDA margin of 33% flat to 2010.
Capital Expenditure: We have assumed capital expenditures of US$700 million in 2008, US$800 million in 2009 and 2010 and then US$750 million beyond that.
Discount Rate: 11.0%.
Terminal Growth Rate: 4.5%.
Our analysis incorporates the cash the $YHOO balance sheet – Valuecruncher calculates a net debt number.
Disclosure: None