Oracle Corp’s intrinsic value, calculated using the discounted earnings model, is $79.98 as of July 8, 2024, while the current trading price is $144.83, indicating that the company is slightly overvalued with a margin of safety of -81.08%. The GuruFocus DCF calculator uses EPS without NRI as a default for the model, based on historical data showing that stock prices are more correlated with earnings than free cash flow.
The model follows a two-stage approach, with a growth stage and a terminal stage. The growth rate is set at 9.60% for 10 years, with a terminal growth rate of 4% for another 10 years. The model assumes consistent growth and evaluates the company based on potential future earnings. It is important to note that the DCF model is based on various assumptions and projections, which can impact the accuracy of the intrinsic value calculation.
Using the discounted free cash flow model, the intrinsic value based on free cash flow per share is $48.23, indicating that Oracle Corp is significantly overvalued with a margin of safety of -200.29%. It is recommended to consider factors such as predictability of performance, growth potential, and selecting an appropriate discount rate when using the DCF model for valuation.
GuruFocus offers the All-in-one analyzer tool to help investors identify predictable and undervalued companies that trade below their intrinsic value based on DCF calculations. It is essential to understand that the analysis provided by GuruFocus is based on historical data and analyst projections and should not be considered as personalized financial advice.
Overall, the DCF model can be a useful tool for estimating intrinsic value, but investors should also consider qualitative factors and the latest company announcements before making investment decisions. GuruFocus does not hold positions in the stocks mentioned in the article and aims to provide long-term analysis based on fundamental data.
Article Source
https://finance.yahoo.com/news/navigating-market-uncertainty-intrinsic-value-120048023.html
