Johnson & Johnson ยท $255.56
โCompound interest is the eighth wonder of the world. He who understands it, earns it.โ
โIntrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life. We use the risk-free rate as our discount rate.โ
โOur favorite holding period is forever. When we own portions of outstanding businesses with outstanding managements, our preferred holding period is forever.โ
Intrinsic Value per ShareYour Parameters
$113.62
Based on your DCF parameters ยท Standard $273.8B ยท Floor(OE) $19.3B
Total Intrinsic Value
$273.8B
Enterprise value โ net debt
Margin of Safetyยท price $255.56
-55.5%
| Year | FCF (B$) | Discounted Value (B$) |
|---|---|---|
| Year 1 | $21.3B | $19.3B |
| Year 2 | $23.4B | $19.3B |
| Year 3 | $25.7B | $19.3B |
| Year 4 | $27.3B | $18.7B |
| Year 5 | $28.0B | $17.4B |
| Terminal Value | โ | $237.8B |
| Total | โ | $331.9B |
References from Buffett's 60 years of letters
โIntrinsic value is the discounted value of the cash that can be taken out of a business during its remaining life. We use the risk-free rate as our discount rate.โ
โCompound interest is the eighth wonder of the world. He who understands it, earns it.โ
โOur favorite holding period is forever. When we own portions of outstanding businesses with outstanding managements, our preferred holding period is forever.โ
โIntrinsic value is an estimate rather than a precise figure. Two people looking at the same set of facts will almost inevitably come up with slightly different intrinsic value figures.โ
โThe three most important words in investing are: margin of safety. You don't try to buy businesses worth $100 million for $80 million.โ
Intrinsic Value = ฮฃ FCFโ/(1+r)แต + TV/(1+r)โฟ
r = discount rate
TV = terminal value
n = forecast period (5 years)
Owner Earnings = Net Income + D&A โ CapEx
Simplified IV = OE ร (8.5 + 2g)
โ ๏ธ Disclaimer
DCF is a valuation tool, not exact science. Intrinsic value is highly sensitive to assumptions. Do not use results as sole basis for investment.