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Valuation range by four methods: P/E, EV / EBITDA, two-stage DCF and dividend discount on one company's figures

ToolValuation Range
SourceApple Inc. (2023). Form 10-K: Annual Report for the Fiscal Year Ended September 30, 2023. U.S. Securities and Exchange Commission, EDGAR accession 0000320193-23-000106, filed 3 November 2023. The share price and every range of assumptions are illustrative.
LevelUndergraduate

Problem

A company reports diluted earnings per share of 6.13, EBITDA of 125,820 million (operating income 114,301 plus depreciation and amortization 11,519), free cash flow of 99,584 million, a dividend of 0.94 a share, net debt of −51,011 million (net cash) and 15,553 million shares. With a P/E range of 20 to 30, an EV / EBITDA range of 15 to 22, a DCF with growth of 5 to 10 % for 10 years, a discount rate of 8 to 10 % and terminal growth of 3 %, and a dividend discount model with a required return of 8 % and growth of 5 to 7 %, find the low and high value per share by each method, where the ranges overlap, and what each method needs to return a share price of 175.

Inputs to Enter

  • Share price 175.00 (illustrative); EPS 6.13; EBITDA 125,820; free cash flow 99,584; dividend 0.94; net debt −51,011; shares 15,553 (money and shares in millions)
  • P/E 20 to 30; EV / EBITDA 15 to 22; DCF growth 5 to 10 %, discount rate 8 to 10 %, terminal growth 3 %, 10 years; dividend growth 5 to 7 % at a required return of 8 %
Open the Valuation Range tool (loaded with this example)

Answers

  • P/E: 20 · 6.13 = 122.60 to 30 · 6.13 = 183.90
  • EV / EBITDA: EV 15 · 125,820 = 1,887,300; shares 1,887,300 − (−51,011) = 1,938,311; per share 1,938,311 / 15,553 = 124.63; at 22: 181.25
  • DCF low case (growth 5 %, discount rate 10 %): q = 1.05 / 1.10 = 0.9545; years 1 to 10 worth 777,930.57; FCF of year 10 162,211.84; terminal value 2,386,831.40, worth 920,226.83 today; EV 1,698,157.39; per share 112.47. High case (10 %, 8 %): 232.67
  • Dividend discount: 0.94 · 1.05 / 0.03 = 32.90 to 0.94 · 1.07 / 0.01 = 100.58
  • Overlap: highest low value 124.63 (EV / EBITDA) is above the lowest high value 100.58 (dividend discount), so the four ranges have no common part; together they run from 32.90 to 232.67
  • At 175.00: 28.55 times earnings; EV 2,670,764 = 21.23 times EBITDA; the DCF returns the price with growth of 6.33 % a year at an 8 % discount rate or 11.10 % at 10 %; the dividend formula with growth of 7.42 % a year for ever

Notes

The tool's default inputs are this case; press Submit (Advanced mode adds EV / revenue 126.50 to 188.11 and P/B 139.85 to 199.79). Every number is checked against an independent numpy / scipy implementation, which also runs the form fills of all 642 companies in the site's company data (test_valuation_range.php). The ranges are the user's assumptions and the bars restate them; the page makes no statement about what the share is worth. A calculator for education and analysis, not investment advice.