Estimating The Intrinsic Value Of Trip.com Group Limited (NASDAQ:TCOM)

Simply Wall St.2021-09-21

In this article we are going to estimate the intrinsic value of Trip.com Group Limited (NASDAQ:TCOM) by taking the expected future cash flows and discounting them to their present value. This will be ...

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This will be ...</p>\n\n<a href=\"https://finance.yahoo.com/news/estimating-intrinsic-value-trip-com-164333871.html\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TCOM","symbol_name":"携程网","start_time":0,"source_url":"https://finance.yahoo.com/news/estimating-intrinsic-value-trip-com-164333871.html","article_id":"2169529686","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/PMwK9Y6g2eLBgbyJUbGGhw--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://s.yimg.com/uu/api/res/1.2/00OqBzbQM9NM6aQKBzc4vA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/992331fc596d921e34ccfa3b8813259a"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2169529686","pubTimestamp":1632156213,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"In this article we are going to estimate the intrinsic value of Trip.com Group Limited (NASDAQ:TCOM)","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"TCOM":"携程网"},"translate_title":"估计携程网的内在价值（纳斯达克：TCOM）","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TCOM":1},"content_text":"In this article we are going to estimate the intrinsic value of Trip.com Group Limited (NASDAQ:TCOM) by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. There's really not all that much to it, even though it might appear quite complex. \n Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. \n See our latest analysis for Trip.com Group \n Crunching the numbers \n We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2022\n2023\n2024\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n\n\n Levered FCF (CN¥, Millions) \nCN¥8.17b\nCN¥9.06b\nCN¥10.4b\nCN¥10.3b\nCN¥10.3b\nCN¥10.4b\nCN¥10.6b\nCN¥10.7b\nCN¥10.9b\nCN¥11.1b\n\n\nGrowth Rate Estimate Source\nAnalyst x9\nAnalyst x6\nAnalyst x2\nAnalyst x1\nEst @ 0.32%\nEst @ 0.82%\nEst @ 1.17%\nEst @ 1.42%\nEst @ 1.59%\nEst @ 1.71%\n\n\n Present Value (CN¥, Millions) Discounted @ 9.9% \nCN¥7.4k\nCN¥7.5k\nCN¥7.8k\nCN¥7.1k\nCN¥6.5k\nCN¥5.9k\nCN¥5.5k\nCN¥5.0k\nCN¥4.7k\nCN¥4.3k\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CN¥62b\n After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.0%. We discount the terminal cash flows to today's value at a cost of equity of 9.9%. \nTerminal Value (TV)= FCF2031 × (1 + g) ÷ (r – g) = CN¥11b× (1 + 2.0%) ÷ (9.9%– 2.0%) = CN¥143b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= CN¥143b÷ ( 1 + 9.9%)10= CN¥56b\n The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is CN¥118b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$28.8, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. \n\n\n\n  NasdaqGS:TCOM Discounted Cash Flow September 20th 2021\n \n\n Important assumptions \n We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Trip.com Group as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.9%, which is based on a levered beta of 1.456. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \n Looking Ahead: \n Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Trip.com Group, there are three additional factors you should look at: \n\n Risks: As an example, we've found 3 warning signs for Trip.com Group (1 is a bit unpleasant!) that you need to consider before investing here. \nFuture Earnings: How does TCOM's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.\n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.\nThis article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2169529686"}