REVERSE DISCOUNTED CASH F

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Instructions:
STEP 1 Determine the Business Growth Cycle Stage
STEP 2 Enter the Stock Ticker
STEP 3 Enter the Companys' Trailing Twelve Month Free Cash Flow
STEP 4 Enter The Terminal Growth Rate
STEP 5 Enter an Appropriate Discount Rate
STEP 6 Change the "Year 1 - 10 Growth Rate" until the "Current Share P
STEP 7 Ask "Is this growth rate too high, too low, or about right?"

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 CASH FLOW (DCF) VALUATION MO
Eome!
FOR VIDEO 📺 INSTRUCTION
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Notes:
A Reverse DCF is a useful valuation tool, but it only work when a company is producing free cash flow. This
works best on companies that are currently in stage 4 & 5. It works OK on companies in Stage 3 & 6. It doe
Companies listed oninU.S.
at all on companies exhanges
Stage 1 & 2 work best. If you use it on a company outside the U.S., you might have
some of the paramters.
Look up the company's trailing 12 month free cash flow. We suggest using Stratosphere.io, but you can us
you'd
This islike. This figuregrowth
the assumed MUSTrate
be positive.
that the company will grow at after year 10. This number is typtically set t
The discount rate is the return
country's long-term Gross Domestic that the investor
Product demands
growth for holding
rate, which a company's
is between 2% andstock.
4%. We assume a ret
by default, which matches the S&P 500's long-term return. However, this number
Move the growth rate up and down until the "Current Share Price" and "Estimated Intrinsic can be moved higher
Value" matchor
depending
This on the investor's
is the growth preference.
rate that free cash flow has to grow at over the next 10 years for the current market pri
If you think the company will grow
sense. You can find an estimate of the faster than thegrowth
company's impliedrate
growth rate, finance
at yahoo then theunder
stockthen
could"analysis
be undervalu
think the company will grow slower than the implied growth rate, then the stock could be overvalued.
Sheet Color Guidelines
Bright Yellow = Enter Data
Dark Yellow = Found On Sheet
Green = Calculation
Blue = Automatic Data
Purple = Guidelines
Grey = Instructions
DEL

Terminal Growth Rate Guideline

Low Growth 1%
Normal Growth 2%
High Growth 3%
Very High Growth 4%

Discount Rate Guideline

Ultra Low Risk - Very Predictable 6%
Low Risk - Predictable 8%
Normal Risk 10%
High Risk 12%
Ultra High Risk - Unpredictable 15%
1. Use this guide to figure out which state of the growth cycle the compa
Reverse DCF works best in Stage 4 & 5. It works OK in Stage 3 & 6.

Current State
Income statement: (Select via dropdown)
Revenue ==> Growing Modestly
Gross Profit ==> Growing Rapidly
perating Profit ==> Growing Rapidly
Net Profit ==> Near Break-even
Share Count ==> Declining
1: Startup 2: Hyper Growth 3: Self funding
None / Little Growing Rapidly Growing Rapidly
Low / Negative Growing Rapidly Growing Rapidly
Negative / Expanding Negative / Expanding Near Break-even
Negative / Expanding Losses Peaking Near Break-even
Increasing RapidlyIncreasing RapidlyIncreasing Modestly

2. Based on the company stage above, select the appropriate valuation me

1: Startup 2: Hyper Growth 3: Self Funding
wth cycle the company is in.
tage 3 & 6. It's useless in Stage 1 and 2.

4: Operating
leverage 5: Capital Return 6: Decline
Growing ModestlyGrowing Slowly Declining
Stable Stable Declining
Growing Rapidly Growing Slowly Declining
Growing Rapidly Growing Slowly Negative / Expanding
Increasing Slowly Declining Increasing

priate valuation
4: Operating
method.
Leverage 5: Capital Return 6: Decline
 FILL IN DATA IN BRIGHT YELLOW
Stock Ticker GOOG
$60,010
e Cash Flow TTM(Trailing 12 Months in Millions)
Terminal Growth Rate(2% - 4% is Typical) 3.0%
Discount Rate(8% - 12% is Typical) 10.0%
Years 1 - 10 Growth Rate(Yahoo Finance) 8.5%

Google Finance Data

Share Price $119.62
Shares Outstanding (Billions) 12.645
Market Cap (Billions) $1,512.57
 FREE CASH FLOW VALUE CALCULATIONS
Current
Estimated
Share Price $119.62
Implied
Intrinisic Value $104.91
Growth Rate 8.5 %
FREE CASH FLOW DATA
Year Free Cash Flow
1 $65,111
2 $70,645
3 $76,650
4 $83,165
5 $90,234
6 $97,904
7 $106,226
8 $115,255
9 $125,052
10 $135,682
TerminalTerminal
Discounted Year $139,752
Total Present Value $769,721
Value ($Millions): $1,326,605
of Cash Flows ($Millions):
 <-- Change Inputs Until

<-- These Numbers Match

ASH FLOWAssumed
DATA Discounted
Growth
8.5% Value
$59,192
8.5% $58,385
8.5% $57,588
8.5% $56,803
8.5% $56,028
8.5% $55,264
8.5% $54,511
8.5% $53,768
8.5% $53,034
8.5% $52,311
of Year 1-10
Number of $556,884
12,644.82
Estimated
Shares (Millions):
Intrinsic Value: $104.91
 FILL IN DATA IN BRIGHT YELLOW
Stock Ticker
e Cash Flow TTM(Trailing 12 Months in Millions)
Terminal Growth Rate(2% - 4% is Typical) 3.0%
Discount Rate(8% - 12% is Typical) 10.0%
Years 1 - 10 Growth Rate(Yahoo Finance)

Google Finance Data

Share Price #N/A
Shares Outstanding (Billions) #VALUE!
Market Cap (Billions) #N/A
 FREE CASH FLOW VALUE CALCULATIONS
Current
Estimated
Share Price #N/A
Implied
Intrinisic Value #VALUE!
Growth Rate 0.0 %
FREE CASH FLOW DATA
Year Free Cash Flow
1 $0
2 $0
3 $0
4 $0
5 $0
6 $0
7 $0
8 $0
9 $0
10 $0
TerminalTerminal
Discounted Year $0
Total Present Value $0
Value (Billions): $0
of Cash Flows ($Billions):
 <-- Change Inputs Until

<-- These Numbers Match

ASH FLOWAssumed
DATA Discounted
Growth
0.0% Value
$0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
0.0% $0
of Year 1-10
Number of $0
#VALUE!
Estimated
Shares (Millions):
Intrinsic Value: #VALUE!