Yahoo Finance Cellnex Telecom SA. (BME:CLNX) Is Trading At A 22% Discount
How far off is Cellnex Telecom SA. (BME:CLNX) from its intrinsic value? Using the most recent financial data, I am going to take a look at whether the stock is fairly priced using the discounted cash flows (DCF) model. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Also note that this article was written in May 2018 so be sure check the latest calculation for Cellnex Telecom here.
Is CLNX fairly valued?
I will be using the 2-stage growth 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 begin, I pulled together the analyst consensus forecast of CLNX’s levered free cash flow (FCF) over the next five years and discounted these values at the rate of 8.68%. This resulted in a present value of 5-year cash flow of €1.52B. Want to know how I calculated this value? Take a look at our detailed analysis here.
The graph above shows how CLNX’s top and bottom lines are expected to move in the future, which should give you an idea of CLNX’s outlook. Next, I determine the terminal value, which is the business’s cash flow after the first stage. I think it’s suitable 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. The present value of the terminal value after discounting it back five years is €5.16B.
The total value, or equity value, is then the sum of the present value of the cash flows, which in this case is €6.68B. To get the intrinsic value per share, we divide this by the total number of shares outstanding. This results in an intrinsic value of €28.85, which, compared to the current share price of €22.5, we see that Cellnex Telecom is about right, perhaps slightly undervalued at a 22.00% discount to what it is available for right now.
Next Steps:
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. What is the reason for the share price to differ from the intrinsic value? For CLNX, I’ve compiled three important factors you should further research:
Financial Health: Does CLNX 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.
Future Earnings: How does CLNX’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.
Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of CLNX? 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 ES 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.
