Today I will be providing a simple run-through of the discounted cash flows (DCF) method to estimate the attractiveness of The Liberty Braves Group (NASDAQ:BATR.K) as an investment opportunity. If you want to learn more about this method, the basis for my calculations can be found in detail in the Simply Wall St analysis model. If you are reading this after January 2018 then I highly recommend you check out the latest calculation for Liberty Braves Group here.
Crunching the numbers
We are going to use a two-stage DCF model, which simply means we have two different periods of varying growth rates for the company’s cash flows. Generally the initial phase has higher growth rates that plateau over time. To start off, I pulled together the analyst consensus forecast of BATR.K’s levered free cash flow (FCF) over the next five years and discounted these values at the rate of 10.73%. When estimates weren’t available, I’ve extrapolated the average annual growth rate over the previous five years, capped at a reasonable level. This resulted in a present value of 5-year cash flow of $383.9M. Want to know how I calculated this value? Take a look at our detailed analysis here.
Above is a visual representation of how BATR.K’s top and bottom lines are expected to move in the future, which should give you some color on BATR.K’s outlook. Then, I calculate the terminal value, which accounts for all the future cash flows after the five years. It’s appropriate to use the 10-year government bond rate of 2.8% as the stable growth rate, which is rightly below GDP growth, but more towards the conservative side. After discounting the terminal value back five years, the present value becomes $676.2M.
The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is $1,060.1M. The last step is to then divide the equity value by the number of shares outstanding. This results in an intrinsic value of $21.43, which, compared to the current share price of $24.05, we find that Liberty Braves Group is fair value, maybe slightly overvalued and not available at a discount at this time.
Whilst important, DCF calculation shouldn’t be the only metric you look at when researching a company.
For BATR.K, I’ve compiled three pertinent factors you should further research:
- 1. Financial Health: Does BATR.K have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Future Earnings: How does BATR.K’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.
- 2. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of BATR.K? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
PS. Simply Wall St does a DCF calculation for every US stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.