Valuation related confusion
I tried to value Accenture but my final numbers are all over the place. Market cap of 83bn, equity reproduction cost of core assets of just 5bn, equity earning power value (no growth) of 42bn and equity growth based earnings power value of core business of 167bn appear incorrect to me even with just 3% terminal growth. Excel is attached. Can someone please look into and let me know where I am going wrong? Also, the annual interest expense is disproportionately high compared to the outstanding debt. Can someone throw some light regarding any obligations that I may be missing? 10-k is also attached.
Thanks.
Update: I had already tried to value SABMiller from fundamentals. After your comment, I will be correcting the valuation approach. But, just by chance, I came to a figure close to its actual deal pricing of 44 pounds per share. Valuation excel attached. Thanks.
| Attachment | Size |
|---|---|
| valuation attempt 144.5 KB | 144.5 KB |
| 10-k 559.5 KB | 559.5 KB |
| sab miller valuation 41 KB | 41 KB |
I don't cover / know much about Accenture, but there are a few notable busts in your model. But for a moment, take that it works at face value:
In your EPV(With growth) tab, you mention your Value of Equity is $167Bn. This is primarily due to your "sustainable growth" being so high. I see what you are trying to do here with the math, but think about it from a business perspective, there is no way Accenture is growing at FCFF ~35% per year for 5 years. If you assume your model is how the market is thinking (valuing Accenture at $83Bn), then the implied "sustainable growth rate" in your model is 18.5% (which is also really high).
Also: When you add back change in networking capital, it should be OPERATING net working capital, so it shouldn't include FINANCING items such as cash and short term debt.
I'm assuming you are still in school, but I would highly recommend pulling a DCF model template and using that as a reference for seeing how people usually model out companies. Your FCFF projections are over simplified.
However, valiant first attempt. I'm assuming you built this from scratch and I encourage you to keep pushing.
Thanks so much. Would you mind nudging me towards the place where I can get a DCF model template? I just refer to Damodaran's book that I have with me.
I'm not 100% sure. I feel like there must be one on the site here somewhere. Otherwise, I'm sure you can google it.
Okay, thanks so much. Did I just get lucky with the SABMiller valuation attached? Or the value per share is too low. The Excel is attached in the original post. Sorry for pestering you too much.
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