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Teladoc Health, Inc.
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== Valuation == === What's the expected return on an investment in the company? === '''<u>Financial Projections</u>''' Using historical and projected financial data, we estimated future Free Cash Flows (FCFs) for Teladoc Health: {| class="wikitable" !'''Year''' !'''2023''' !'''2024''' !'''2025''' !'''2026''' !'''2027''' |- |'''FCF''' |$17.9M | 48.5M | 51.8M | 56.0M | 62.7M |} Terminal value = 1091.5 <u>'''Discounted cash flow valuation'''</u> '''Assumptions and Methodology:''' Our DCF valuation involved the following steps: # Projecting the Free Cash Flows (FCF) for the next five years. # Calculating the Terminal Value, using both the perpetuity growth method. # Discounting projected FCFs and Terminal Value to the present value using a calculated Weighted Average Cost of Capital (WACC) of 7.86%. # Deriving the Equity Value by adjusting the Enterprise Value for net debt. # Establishing the Equity Value per Share by dividing total equity value by shares outstanding. For this analysis, we will utilize the Perpetuity Growth Method to calculate the terminal value. Key assumptions include: For this analysis, we will utilize the Perpetuity Growth Method to calculate the terminal value. Key assumptions include: '''Perpetuity Growth Rate''': 2.0% '''Final Year FCF''': $17.9 million (2023 projection) '''<u>Discounted Cash Flow (DCF) Valuation</u>''' The present value of projected Free Cash Flows and the terminal value are calculated using the WACC of 7.86%: '''Key Findings''' '''Projected Free Cash Flows (2023-2027)''': We observed a trend of increasingly positive FCFs over the five-year period, starting from 17.9M in 2023 and rising to 62.7 by 2027. '''Terminal Value''': Our method rendered a Terminal Value of 1091.5M, indicative of long-term positive growth. '''Enterprise Value''': The aggregated present value of FCFs and the NPV of the Terminal Value provided an Enterprise Value of 931.59M. '''Equity Value and Per Share''': Adjusting for a net debt of 627.014M, we determined an Equity Value of 304.6M. Dividing this by the outstanding shares (758M), we derived an Equity Value per Share of 0.40 '''Market Comparison''': Contrasting our valuation with the current market price, TDOC’s shares are trading at £25.08, suggesting a substantial divergence from our intrinsic valuation. '''<u>Conclusion</u>''' The DCF valuation analysis indicates a substantial discrepancy between the calculated equity value per share and the current share price. The negative value suggests that the market price may be significantly overvalued, warranting a cautious outlook for potential investors. It's important to reevaluate the underlying assumptions and data used in this analysis to ensure accuracy in assessing Teladoc Health's true intrinsic value. However, there are a few considerations to take into account: '''Assumptions Re-evaluation''': Our model paints a rather pessimistic picture. It’s essential to ensure growth rates, WACC, and terminal values are congruent with long-term industry expectations. '''External Factors''': Mergers, divestitures, and other corporate maneuvers could heavily influence TDOC's valuation and may not be captured in our model. '''Sensitivity Analysis''': We recommend a deeper dive into sensitivity analyses. Varying assumptions, especially WACC and the perpetuity growth rate, can lead to a wide range of valuations, and experts should ascertain the robustness of our findings against these variations. '''Complementary Valuation Methods''': DCF, while powerful, is just one lens through which to view valuation. A holistic approach might involve peer group comparisons or precedent transaction analysis. In summary, while our DCF suggests overvaluation, experts are advised to consider the assumptions carefully, employ sensitivity analyses, and juxtapose these findings against other valuation methodologies to make a well-informed decision
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