DCF Base Year 1 2 3 4 Assumptions:: Valuation of Facebook, Based On Prof. Aswath Damodaran
DCF Base Year 1 2 3 4 Assumptions:: Valuation of Facebook, Based On Prof. Aswath Damodaran
DCF Base Year 1 2 3 4 Assumptions:: Valuation of Facebook, Based On Prof. Aswath Damodaran
ASWATH DAMODARAN
2011 2012E 2013E 2014E 2015E
DCF Base year 1 2 3 4
Assumptions:
Revenue growth rate 40.0% 40.0% 40.0% 40.0%
EBIT (Operating) margin 45.7% 44.6% 43.5% 42.5% 41.4%
Tax rate 40.0% 40.0% 40.0% 40.0% 40.0%
Increase in CAPEX + WC as % of sales 67% 67% 67% 67%
Cost of capital 11.1% 11.1% 11.1% 11.1%
67% 67% 67% 67%
Free cash flow to firm ($ millions):
Revenues 3,711 5,195 7,274 10,183 14,256
EBIT 1,695 2,318 3,167 4,325 5,903
EBIT(1-tax) 1,017 1,391 1,900 2,595 3,542
Increase in CAPEX + WC 995 1,392 1,949 2,729
FCFF 396 508 646 813
Terminal value
Present value:
Cumulative discount factor 0.9004 0.8107 0.7300 0.6573
PV of FCFF and TV 357 412 471 534
Market numbers
Riskfree rate 2.0%
Initial cost of capital 11.1%
Cost of capital after year 10 8.0%
Debt
Pre-tax Cost of Debt 3.65%
Marginal tax rate 35%
Preferred Stock
Number of Preferred Shares 0
Current Market Price per Share 70
Annual Dividend per Share 5
2016E 2017E 2018E 2019E 2020E 2021E Terminal
5 6 7 8 9 10 year
EV/Sales Price/Earnings
2013E 2014E
1.6x 1.3x
3.3x 2.8x
1.9x 1.8x
5.4x 4.6x
3.4x 2.6x
12.7x 8.6x
3.4x 3.2x
4.1x 4.0x
4.5x 3.7x
4.5x 3.6x
3.4x 3.2x
10.0x 7.1x
11.2x 8.0x
Revenue Growth Rate 40%
EBIT Margin 35%
Value per share 35.47
WACC 11.10%
Perpetual Growth 2%
WACC
35.47 7.1% 8.1% 9.1% 10.1% 11.1% 12.1% 13.1%
1.0%
1.2%
1.4%
1.6%
Perpetual 1.8%
Growth 2.0%
Rate 2.2%
2.4%
2.6%
2.8%
3.0%
55% 60%
14.1% 15.1%
Particulars 2011 2012 2013 2014 2015
Revenue Growth Rate 60% 55% 50% 40%
Revenue 3,711 5,938 9,203 13,805 19,327
Change in Sales 2,227 3,266 4,602 5,522
Costs and Expenses:
Costs of revenue 860 1,376 2,133 3,199 4,479
Marketing and Sales 427 683 1,059 1,588 2,224
Research and Development 388 621 962 1,443 2,021
General and Administrative 280 448 694 1,042 1,458
Total costs and expenses 1,955 3,128 4,848 7,273 10,182
Income from Operations 1,756 2,810 4,355 6,532 9,145
Less: Taxes 702 1,124 1,742 2,613 3,658
40% 40% 40% 40% 40%
NOPAT 1,054 1,686 2,613 3,919 5,487
Less: Increase in Capex and NWC 1,492 2,188 3,083 3,700
(% of change in sales) 67% 67% 67% 67%
Free Cash Flows 194 425 836 1,787
Terminal Value
Total Free Cash Flows 194 425 836 1,787
PV of Cash Flows 79,865
EV/Sales Price/Earnings
Share
Firm Price 2013E 2014E 2013E 2014E
Amazon $ 224.39 1.3x 0.9x 177.7x 109.5x
Google $ 611.11 4.7x 3.6x 14.5x 12.4x
LinkedIn $ 110.56 10.7x 7.3x 173.4x 96.6x
Yahoo! $ 15.40 2.8x 2.6x 17.1x 15.0x
Zynga $ 8.56 5.9x 4.9x 33.4x 25.1x
Average 5.1x 3.9x 83.2x 51.7x
Chosen because of similar industry
Facebook Estimates
EV/Sales Price/Earnings