Intrinsic Value Calculation Sheet 2023 > IV calculation

Variable Parameter Input value Unit LEVEL 1 tests Output value

Company name & ticker Company name text Calculated market cap to determine if company can be considered blue chip 0.00
Date of analysis 3/21/2023 date Cash to Market cap #DIV/0!
A1 Current share price 0.00 in currency
A2 Expected return as shareholder / your cost of capital 0.00% in % Level 1 tests - Valuation ratios
P/E Price to Earnings #DIV/0!
Variable Balance sheet items Unit P/FCF Price to Free Cash Flow #DIV/0!
B1 Equity Attributable to Parent Stockholders 0.00 millions P/S Price to Sales #DIV/0!
B2 Number of outstanding shares 0.00 millions
B3 Cash & cash equivalents 0.00 millions Level 1 tests - Profitability & value creation metrics
B4 Financing liabilities long-term/non-current 0.00 millions ROE Return on Equity (net income / equity) #DIV/0!
B5 Intangible assets (trademarks, patents, IP, …) excluding Goodwill 0.00 millions ROIC Return on Invested Capital (net income / (equity + financial debt - cash & cash equivalents)) #DIV/0!
B6 Brand value 0.00 millions Capital spread (ROIC - expected return as shareholder) #DIV/0!

Variable Income statement items Unit Level 1 tests - Solvency metrics

I1 Latest annual revenue/gross income 0.00 millions D/E Debt to equity #DIV/0!
I2 Latest annual net income/income after taxes 0.00 millions Interest coverage ratio #DIV/0!
I3 Interest expense 0.00 millions Cash to Long-term debt/liabilities #DIV/0!

Variable Cash flow statement items LEVEL 2 tests - Valuation process Output value
C1 Latest annual free cash flow 0.00 millions Book value per share #DIV/0!
C2 Cash dividends paid excluding share buybacks 0.00 millions P/B Price to Book #DIV/0!

C3 Latest annual dividend per share (or 3y or 5y average) 0.00 millions Level 2 tests - Dividend yield metrics
C4 Dividend growth (I recommend to take 3 to 5y average) 0.00% in % Payout ratio #DIV/0!
C5 Total Issuance of (-) /Payment for Common Stock (+) 0.00 millions Cash dividend yield #DIV/0!
Total shareholder yield (cash dividends + share buybacks) #DIV/0!
Variable Growth assumptions for next 30 years per decade Unit Share buyback dividend (in absolute currency per share) #DIV/0!
G1 Future growth in earnings & cash flow Y1 to Y10 0.00% in %
G2 Future growth in earnings & cash flow Y11 to Y20 0.00% in % Level 2 tests - Dividend intrinsic valuation Intrinsic value per share Margin of safety vs current share price
G3 Future growth in earnings & cash flow Y21 to Y30 0.00% in % Gordon dividend model IV (pure dividend yield & no growth on dividends nor share buybacks) #DIV/0! #DIV/0!
Gordon dividend growth IV (2 factors - dividend yield & growth of dividends) #DIV/0! #DIV/0!
Total shareholder return IV (2 factors - dividend yield + buyback yield but no growth on dividends) #DIV/0! #DIV/0!
Total shareholder return growth IV (3 factors - adds dividend growth to dividend yield & buyback yield) #DIV/0! #DIV/0!

Level 2 tests - Discounted Future Earnings & Future Cash Flow intrinsic valuation Intrinsic value per share Margin of safety vs current share price
Future earnings/net income IV 0.00 -100.00%
Future cash flows IV 0.00 -100.00%

LEVEL 3 tests - Moat valuation Output value

Adjusted book value per share (after brand adjustment) #DIV/0!
Adj P/B Price to Adjusted Book value #DIV/0!

The Art of Value Investing / Candi Carrera / 36 Square Capital

Intrinsic Value Calculation Sheet 2023 > Variables & Instructions
Variable Parameter Instructions
A1 Current share price per share price, either EUR, USD or any other currency
A2 Expected return as shareholder / your cost of capital This should reflect your minimum cost of capital. Remember that it should be above long-term inflation average

Variable Balance sheet items Instructions

B1 Equity Attributable to Parent Stockholders If there is a non-controlling interest, use the number AFTER the non-controlling interest which should be smaller
B2 Number of outstanding shares Use preferably the higher diluted number of outstanding shares as diluted includes employee remuneration
Depending on the company, the company may carry some Level 1 Marketable securities that are shown separately from Cash & cash equivalents. My recommendation is only to add Level 1 Marketable securities to be on
B3 Cash & cash equivalents the safe side

B4 Financing liabilities long-term/non-current I recommend only taking long-term financing liabilities. If you want to be more strict you could add the short-term portion of the financing liability and/or also any long-term pension & other employment liabilities

Look in the non-current assets if the company is providing intangible assets. If there is no Goodwill line next to the intangible assets, it means that either the company has no goodwill coming from acquisitions or that the
B5 Intangible assets (trademarks, patents, IP, …) excluding Goodwill goodwill is inside the intangible assets. In such case you need to look up the note related to intangible assets and deduct from the total intangible assets number the amount of goodwill. Example if goodwill is 1MUSD,
intangible assets including goodwill 3MUSD, the value in this field should only be 3-1 = 2MUSD

Look for Interbrand or similar brand agencies that quantify the value of the brand(s) of the company you are analysing as explained in the training. Put the brand value estimated by the brand agency here. If the company
B6 Brand value has multiple brands and the various brands are estimated separately make a sum of all the brands. The Excel file will take care of deducting the intangible assets from the brand value to avoid double counting.

Variable Income statement items Instructions

I1 Latest annual revenue/gross income Use the total amount of revenues before COGS/Cost of sales. Be attentive to take an annual value or estimate the annual value if you are looking at a quarterly report
I2 Latest annual net income/income after taxes Use the net income amount after non-controlling interest. Be attentive to take an annual value or estimate the annual value if you are looking at a quarterly report
I3 Interest expense Be attentive to take an annual value or estimate the annual value if you are looking at a quarterly report

Variable Cash flow statement items Instructions

C1 Latest annual free cash flow Be attentive to take an annual value or estimate the annual value if you are looking at a quarterly report
C2 Cash dividends paid excluding share buybacks Be attentive to take an annual value or estimate the annual value if you are looking at a quarterly report

C3 Latest annual dividend per share (or 3y or 5y average) If the cash dividend is fluctuating take a 3 or 5 average. If the company is a dividend king/aristocrat take the latest annual dividend or even the last quarter dividend and multiply by 4

C4 Dividend growth (I recommend to take 3 to 5y average) If the company is flat on dividends or fluctuating I recommend leaving value to 0% here. If you believe the company will grow its annual dividend YoY put a reasonable number in here. It is better to be a little bit more
defensive as value investor
If the company has been printing new shares that is a NEGATIVE (-) number as they are spending money, if the company is doing share buybacks that is a POSITIVE (+) number. In the cash flow statement, the share buybacks
C5 Total Issuance of (-) /Payment for Common Stock (+) will often be reported as a NEGATIVE number hence be attentive to take the value but inverse the sign please.

Variable Growth assumptions for next 30 years per decade Instructions

G1 Future growth in earnings & cash flow Y1 to Y10 Your best guess of revenue and profitability growth for the next 1 to 10 years. Remember that I am NOT using a terminal value just to be more conservative in the intrinsic value calculation using DCF/DFE.
G2 Future growth in earnings & cash flow Y11 to Y20 Your best guess of revenue and profitability growth for the next 11 to 20 years. Remember that I am NOT using a terminal value just to be more conservative in the intrinsic value calculation using DCF/DFE.
G3 Future growth in earnings & cash flow Y21 to Y30 Your best guess of revenue and profitability growth for the next 21 to 30 years. Remember that I am NOT using a terminal value just to be more conservative in the intrinsic value calculation using DCF/DFE.

The Art of Value Investing / Candi Carrera / 36 Square Capital

Intrinsic Value Calculation Sheet 2023 > Results & interpretation
LEVEL 1 tests Interpretation

Calculated market cap to determine if company can be considered blue chip mega-cap: market value of $200 billion or more; large-cap: market value between $10 billion and $200 billion; mid-cap: market value between $2 billion and $10 billion; small-cap: market value between $250 million and $2
billion; and micro-cap: market value of less than $250 million Source : https://www.finra.org/investors/insights/market-cap
Cash to Market cap

Level 1 tests - Valuation ratios

P/E Price to Earnings Should be at least <15, even cheaper <10. This is the amount of years of today's annual earnings that you are buying
P/FCF Price to Free Cash Flow Similar interpretation than P/E. Remember that over time cash & income have to correlate. For that reason, I believe that the <15 and/or <10 interpretation remain valid
P/S Price to Sales I calculate here for your convenience but not an important metric

Level 1 tests - Profitability & value creation metrics

ROE Return on Equity (net income / equity) Remember that ROIC is a better performance measure than ROE
ROIC Return on Invested Capital (net income / (equity + financial debt - cash & cash equivalents)) The most important value creation measure, the closer to 10% the better

Capital spread (ROIC - expected return as shareholder) The capital spread is a value that calculates the value creation of the company ABOVE your expected return as shareholder. Remember that ROIC > WACC is expected. The capital spread is in fact the formula Capital Spread
= ROIC - WACC. This value has to be > 0 otherwise the company is not covering its cost of capital which is basically your return expectation as shareholder

Level 1 tests - Solvency metrics

D/E Debt to equity Depends on the industry but having a D/E below 1,5 or even below 1 is really nice

Interest coverage ratio Interest coverage ratio > 8 is Triple AAA debt rating, when the ratio gets closer to 3 or to 2, it means that a big part of the income will be consumed to pay the cost of servicing the debt (not even to reduce the amount of debt)

Cash to Long-term debt/liabilities

LEVEL 2 tests - Valuation process Interpretation

Book value per share

P/B Price to Book Interest coverage ratio > 8 is Triple AAA debt rating, when the ratio gets closer to 3 or to 2, it means that a big part of the income will be consumed to pay the cost of servicing the debt (not even to reduce the amount of debt)

Level 2 tests - Dividend yield metrics

Payout ratio This value should be ideally >30% and below <70%. <30% the company is not providing enough return to shareholders, >70% the dividends may become unsustainable
Cash dividend yield This should at least cover your cost of inflation. While your money sits still, you need to earn at least the cost of inflation. My benchmark is around 5-6% after taxes
Total shareholder yield (cash dividends + share buybacks) This should at least cover your cost of inflation. While your money sits still, you need to earn at least the cost of inflation. My benchmark is around 5-6% after taxes
Share buyback dividend (in absolute currency per share) Only as supplemental information

Level 2 tests - Dividend intrinsic valuation

Gordon dividend model IV (pure dividend yield & no growth on dividends nor share buybacks)
Gordon dividend growth IV (2 factors - dividend yield & growth of dividends)
Total shareholder return IV (2 factors - dividend yield + buyback yield but no growth on dividends)
Total shareholder return growth IV (3 factors - adds dividend growth to dividend yield & buyback yield)

Level 2 tests - Discounted Future Earnings & Future Cash Flow intrinsic valuation
Future earnings/net income IV Should be preferably 25% at least if not 30%
Future cash flows IV Should be preferably 25% at least if not 30%

LEVEL 3 tests - Moat valuation Interpretation

Adjusted book value per share (after brand adjustment)
This can be interpreted as a multiple of buying the assets of the balance sheet. Remember that we do not buy companies for their balance sheet assets but for the profits & cash flows that the company assets will generate
Adj P/B Price to Adjusted Book value in the future. It is good if the multiple is below <3. P/B below 1 means that you are buying the company at a discount vs its book value. Example : if Adj P/B is 0.7 it means that the market is giving the company's balance
sheet away at -30% vs its equity value.

The Art of Value Investing / Candi Carrera / 36 Square Capital

Intrinsic Value Calculation Sheet 2023 > IV calculation

Variable Parameter Input value Unit LEVEL 1 tests Output value

Company name & ticker Company name text Calculated market cap to determine if company can be considered blue chip 3,562.80
Date of analysis 3/21/2023 date Cash to Market cap 6.18%
A1 Current share price 20.00 in currency
A2 Expected return as shareholder / your cost of capital 6.50% in % Level 1 tests - Valuation ratios
P/E Price to Earnings 8.49
Variable Balance sheet items Unit P/FCF Price to Free Cash Flow 8.00
B1 Equity Attributable to Parent Stockholders 1,743.07 millions P/S Price to Sales 2.10
B2 Number of outstanding shares 178.14 millions
B3 Cash & cash equivalents 220.30 millions Level 1 tests - Profitability & value creation metrics
B4 Financing liabilities long-term/non-current 3,584.51 millions ROE Return on Equity (net income / equity) 24.09%
B5 Intangible assets (trademarks, patents, IP, …) excluding Goodwill 100.00 millions ROIC Return on Invested Capital (net income / (equity + financial debt - cash & cash equivalents)) 8.22%
B6 Brand value 500.00 millions Capital spread (ROIC - expected return as shareholder) 1.72%

Variable Income statement items Unit Level 1 tests - Solvency metrics

I1 Latest annual revenue/gross income 1,696.00 millions D/E Debt to equity 2.06
I2 Latest annual net income/income after taxes 419.82 millions Interest coverage ratio 8.40
I3 Interest expense 50.00 millions Cash to Long-term debt/liabilities 6.15%

Variable Cash flow statement items LEVEL 2 tests - Valuation process Output value
C1 Latest annual free cash flow 445.38 millions Book value per share 9.78
C2 Cash dividends paid excluding share buybacks 101.47 millions P/B Price to Book 2.04

C3 Latest annual dividend per share (or 3y or 5y average) 1.84 millions Level 2 tests - Dividend yield metrics
C4 Dividend growth (I recommend to take 3 to 5y average) 1.00% in % Payout ratio 22.78%
C5 Total Issuance of (-) /Payment for Common Stock (+) -130.00 millions Cash dividend yield 9.20%
Total shareholder yield (cash dividends + share buybacks) 5.55%
Variable Growth assumptions for next 30 years per decade Unit Share buyback dividend (in absolute currency per share) -0.73
G1 Future growth in earnings & cash flow Y1 to Y10 3.00% in %
G2 Future growth in earnings & cash flow Y11 to Y20 3.00% in % Level 2 tests - Dividend intrinsic valuation Intrinsic value per share Margin of safety vs current share price
G3 Future growth in earnings & cash flow Y21 to Y30 3.00% in % Gordon dividend model IV (pure dividend yield & no growth on dividends nor share buybacks) 28.31 41.54%
Gordon dividend growth IV (2 factors - dividend yield & growth of dividends) 33.45 67.27%
Total shareholder return IV (2 factors - dividend yield + buyback yield but no growth on dividends) 17.08 -14.60%
Total shareholder return growth IV (3 factors - adds dividend growth to dividend yield & buyback yield) 20.19 0.93%

Level 2 tests - Discounted Future Earnings & Future Cash Flow intrinsic valuation Intrinsic value per share Margin of safety vs current share price
Future earnings/net income IV 0.00 -100.00%
Future cash flows IV 0.00 -100.00%

LEVEL 3 tests - Moat valuation Output value

Adjusted book value per share (after brand adjustment) 12.03
Adj P/B Price to Adjusted Book value 1.66

The Art of Value Investing / Candi Carrera / 36 Square Capital

Discounted Earnings

1 2 3 4 5 6 7 8
3% 3% 3% 3% 3% 3% 3% 3%
0.9390 0.8817 0.8278 0.7773 0.7299 0.6853 0.6435 0.6042
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

Discounted FCF

1 2 3 4 5 6 7 8
3% 3% 3% 3% 3% 3% 3% 3%
0.9390 0.8817 0.8278 0.7773 0.7299 0.6853 0.6435 0.6042
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
 9 10 11 12 13 14 15 16 17 18
3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
0.5674 0.5327 0.5002 0.4697 0.4410 0.4141 0.3888 0.3651 0.3428 0.3219
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
IV 10y
0 0 0 0 0 0 0 0 0 0
0.00
-100.00%

9 10 11 12 13 14 15 16 17 18
3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
0.5674 0.5327 0.5002 0.4697 0.4410 0.4141 0.3888 0.3651 0.3428 0.3219
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
IV 10y
0.00
-100.00%
 19 20 21 22 23 24 25 26 27 28
3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
0.3022 0.2838 0.2665 0.2502 0.2349 0.2206 0.2071 0.1945 0.1826 0.1715
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
IV 20y
0 0 0 0 0 0 0 0 0 0
0.00
-100.00%

19 20 21 22 23 24 25 26 27 28
3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
0.3022 0.2838 0.2665 0.2502 0.2349 0.2206 0.2071 0.1945 0.1826 0.1715
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
IV 20y
0.00
-100.00%
 29 30
3% 3%
0.1610 0.1512
0 0
0 0
IV 30y
0 0
0.00
-100.00%

29 30
3% 3%
0.1610 0.1512
0 0
0 0
IV 30y
0.00
-100.00%