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This document provides a 3-year discounted cash flow model for evaluating the stock of Costco. It includes Costco's current stock price, shares outstanding, expected free cash flow over the next 3 years, long-term growth rate, discount rate, and margin of safety. Based on the model, the estimated intrinsic value of Costco is $61.29 per share, indicating the stock is undervalued by $90.48 based on the current price of $151.77.

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Gimme Dunlods
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44 views

You Can Find It Here On Amazon or Check Your Local Library System For A

This document provides a 3-year discounted cash flow model for evaluating the stock of Costco. It includes Costco's current stock price, shares outstanding, expected free cash flow over the next 3 years, long-term growth rate, discount rate, and margin of safety. Based on the model, the estimated intrinsic value of Costco is $61.29 per share, indicating the stock is undervalued by $90.48 based on the current price of $151.77.

Uploaded by

Gimme Dunlods
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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DCF Lesson

This is a simple Discounted Cash Flow (DCF) model taken from chapter 10 of Pat Dorsey's book "The Five Rules fo
I highly recommend reading it to get the most out of this worksheet.
You can find it here on Amazon or check your local library system for a copy.

DISCLAIMER: This is intended as an educational tool at most. Please don't think you've found the Rosetta Stone o
rsey's book "The Five Rules for Successful Investing."

've found the Rosetta Stone of investing and go lose a bunch of money.
Enter Your Stock's Info
(In Green Cells Only)

Stock COST
Date 2015.10.15
Current Stock Price $ 151.77
Shares outstanding (mil) 442
Next year's free cash flow (mil) $ 1,943
Perpetuity growth rate (g) 3%
Discount Rate ( r ) 10.5%
10 year Growth Rate 7.0%
Margin of Safety 20%

Year 1 2 3 4
Free Cash Flow (mil) $ 1,943 $ 2,079 $ 2,225 $ 2,380
÷ Discount Factor 110.5% 122.1% 134.9% 149.1%
= Discounted FCF (mil) $ 1,758 $ 1,703 $ 1,649 $ 1,597

Perpetuity Value (mil) $ 50,529


÷ Discount Factor 271.4%
= Discounted Perpetuity Value (mil) $ 18,617

+ Sum of Discounted FCF $ 15,278


= Total Equity Value (mil) $ 33,895

Per Share Value $ 76.62


- Margin of Safety 20% Undervalued (Overvalued) by:
= Estimated Value $ 61.29 $ (90.48)
5 6 7 8 9 10
$ 2,547 $ 2,725 $ 2,916 $ 3,120 $ 3,338 $ 3,572
164.7% 182.0% 201.2% 222.3% 245.6% 271.4%
$ 1,546 $ 1,497 $ 1,450 $ 1,404 $ 1,359 $ 1,316

ed (Overvalued) by:

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