Altria Group, Inc. (NYSE:MO) Shares Could Be 42% Below Their Intrinsic Value Estimate
Altria Group, Inc. (NYSE:MO) Shares Could Be 42% Below Their Intrinsic Value Estimate
Key Insights
- Altria Group's estimated fair value is US$74.10 based on 2 Stage Free Cash Flow to Equity
- Current share price of US$43.12 suggests Altria Group is potentially 42% undervalued
- Analyst price target for MO is US$46.61 which is 37% below our fair value estimate
How far off is Altria Group, Inc. (NYSE:MO) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by estimating the company's future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Don't get put off by the jargon, the math behind it is actually quite straightforward.
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
Step By Step Through The Calculation
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) forecast
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$8.49b | US$8.16b | US$7.76b | US$7.03b | US$6.78b | US$6.66b | US$6.62b | US$6.63b | US$6.69b | US$6.78b |
Growth Rate Estimate Source | Analyst x3 | Analyst x3 | Analyst x2 | Analyst x1 | Est @ -3.58% | Est @ -1.82% | Est @ -0.59% | Est @ 0.28% | Est @ 0.88% | Est @ 1.30% |
Present Value ($, Millions) Discounted @ 6.8% | US$7.9k | US$7.2k | US$6.4k | US$5.4k | US$4.9k | US$4.5k | US$4.2k | US$3.9k | US$3.7k | US$3.5k |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$52b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.8%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$6.8b× (1 + 2.3%) ÷ (6.8%– 2.3%) = US$153b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$153b÷ ( 1 + 6.8%)10= US$79b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$131b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$43.1, the company appears quite good value at a 42% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
Important Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Altria Group as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.8%, which is based on a levered beta of 0.985. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for Altria Group
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Dividends are covered by earnings and cash flows.
- Dividend is in the top 25% of dividend payers in the market.
- Dividend information for MO.
- No major weaknesses identified for MO.
- Annual earnings are forecast to grow for the next 3 years.
- Good value based on P/E ratio and estimated fair value.
- Total liabilities exceed total assets, which raises the risk of financial distress.
- Annual earnings are forecast to grow slower than the American market.
- Is MO well equipped to handle threats?
Moving On:
Whilst important, the DCF calculation shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For Altria Group, we've put together three relevant items you should explore:
- Risks: We feel that you should assess the 1 warning sign for Altria Group we've flagged before making an investment in the company.
- Future Earnings: How does MO's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
關鍵見解
- 根據兩階段的股本自由現金流,奧馳亞集團的公允價值估計爲74.10美元
- 當前股價爲43.12美元,表明奧馳亞集團可能被低估了42%
- 密蘇里州分析師的目標股價爲46.61美元,比我們的公允價值估計低37%
奧馳亞集團公司(紐約證券交易所代碼:MO)距離其內在價值有多遠?使用最新的財務數據,我們將通過估算公司未來的現金流並將其折扣爲現值來研究股票的定價是否公平。這將使用折扣現金流 (DCF) 模型來完成。不要被行話嚇跑,它背後的數學其實很簡單。
公司可以在很多方面得到估值,因此我們要指出,DCF並不適合所有情況。對於那些熱衷於股票分析的人來說,你可能會對這裏的Simply Wall St分析模型感興趣。
逐步進行計算
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,而第二階段通常被認爲具有穩定的增長率。首先,我們必須估算出未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
通常,我們假設今天的一美元比未來一美元更有價值,因此我們需要對這些未來現金流的總和進行折價才能得出現值估計:
10 年自由現金流 (FCF) 預測
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 8.49億美元 | 81.6 億美元 | 7.76億美元 | 7.03億美元 | 6.78億美元 | 6.66 億美元 | 6.62 億美元 | 6.63億美元 | 669 億美元 | 6.78億美元 |
增長率估算來源 | 分析師 x3 | 分析師 x3 | 分析師 x2 | 分析師 x1 | 美國東部標準時間 @ -3.58% | Est @ -1.82% | Est @ -0.59% | Est @ 0.28% | Est @ 0.88% | 東部時間 @ 1.30% |
現值(美元,百萬)折扣 @ 6.8% | 7.9 萬美元 | 7.2 萬美元 | 64 萬美元 | 54 萬美元 | 4.9 萬美元 | 4.5 萬美元 | 4200 美元 | 3.9 萬美元 | 3.7 萬美元 | 3.5 萬美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 520 億美元
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們將未來的現金流折現爲今天的價值,使用6.8%的股本成本。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 68億美元× (1 + 2.3%) ÷ (6.8% — 2.3%) = 1530億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 1530億美元÷ (1 + 6.8%)10= 790億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲1310億美元。最後一步是將股票價值除以已發行股票的數量。與目前的43.1美元股價相比,該公司看起來物有所值,比目前的股價折扣了42%。但是,估值是不精確的工具,就像望遠鏡一樣——移動幾度,最終進入另一個星系。請記住這一點。
重要假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。你不必同意這些輸入,我建議你自己重做計算然後試一試。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將奧馳亞集團視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了6.8%,這是基於0.985的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
奧馳亞集團的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 收益和現金流足以彌補債務。
- 股息由收益和現金流支付。
- 股息在市場上名列前25%的股息支付者。
- 密蘇里州股息信息
- 沒有發現 MO 的主要弱點。
- 預計未來三年的年收入將增長。
- 根據市盈率和估計的公允價值,物有所值。
- 總負債超過總資產,這增加了財務困境的風險。
- 預計年收益的增長速度將低於美國市場。
- MO 有足夠的能力應對威脅嗎?
繼續前進:
儘管重要,但DCF的計算不應是你在研究公司時唯一考慮的指標。DCF模型並不是投資估值的萬能藥。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。如果一家公司以不同的速度增長,或者其股本成本或無風險利率急劇變化,則產出可能會大不相同。股價低於內在價值的原因是什麼?對於奧馳亞集團,我們彙總了三個相關項目,你應該探討:
- 風險:我們認爲,在投資奧馳亞集團之前,您應該評估我們標記的奧馳亞集團的1個警告信號。
- 未來收益:密蘇里州與同行和整個市場相比如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St應用程序每天對紐約證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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