A look at the intrinsic value of CSP International Fashion Group S.p.A. (BIT: CSP)

ILO: CSP) taking the company’s future cash flows and discounting them to their present value. I will use the Discounted Cash Flow (DCF) model. It may sound complicated, but in fact it’s quite simple! “Data-reactid =” 27 “> In this article, we will estimate the intrinsic value of CSP International Fashion Group S.p.A. (ILO: CSP) taking the company’s future cash flows and discounting them to their present value. I will use the Discounted Cash Flow (DCF) model. It may sound complicated, but in fact, it’s quite simple!

Simply Wall St analysis model. “data-reactid =” 28 “> Remember, however, that there are many ways to estimate the value of a business and that a DCF is just a method. If you want to know more on discounted cash flows, the rationale for this calculation can be read in detail in the Simply Wall St analysis model.

See our latest analysis for CSP International Fashion Group “data-reactid =” 29 “> See our latest analysis for CSP International Fashion Group

The calculation

We have to calculate the value of CSP International Fashion Group slightly differently from other stocks because it is a luxury business. In this approach, dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. This often underestimates the value of a stock, but it can still be good in comparison to competitors. The “Gordon growth model” is used, which simply assumes that dividend payments will continue to increase at a sustainable growth rate forever. The dividend is expected to grow at an annual growth rate equal to the 10-year government bond rate of 1.2%. We then update this figure to its current value at cost of equity of 8.7%. Compared to the current share price of € 0.6, the company appears at around fair value at the time of writing. Assessments, however, are imprecise instruments, much like a telescope – move a few degrees and end up in a different galaxy. Keep this in mind.

Value per share = expected dividend per share / (discount rate – perpetual growth rate)

= € 0.04 / (8.7% – 1.2%)

= € 0.5

Important assumptions

The above calculation is very dependent on two assumptions. One is the discount rate and the other is the cash flow. You don’t have to agree with these entries, I recommend that you redo the calculations yourself and play with them. The DCF also does not take into account the possible cyclicality of an industry or the future capital needs of a company, it therefore does not give a complete picture of the potential performance of a company. Since we view CSP International Fashion 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) that represents debt. In this calculation, we used 8.7%, which is based on a leveraged beta of 0.915. Beta is a measure of the volatility of a security compared to the market as a whole. We get our beta version of the average beta version of the globally comparable business sector, with a limit set between 0.8 and 2.0, which is a reasonable range for a stable business.

Next steps:

While evaluating a business is important, it should not be the only measure you consider when looking for a business. The DCF model is not a perfect tool for evaluating actions. Rather, it should be viewed as a guide to “what assumptions must be true for this stock to be undervalued / overvalued?” If a business grows at a different rate, or if its cost of equity or risk-free rate changes significantly, production can be very different. For CSP International Fashion Group, there are three basic factors that you should explore:

  1. Financial health: Does the CSP have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors such as leverage and risk.
  2. Other high quality alternatives: Are there other high quality stocks you could own instead of CSP? To explore our interactive list of high quality stocks to get an idea of ​​what else you might miss!

search here. “data-reactid =” 58 “> PS. The Simply Wall St app performs an updated assessment of the cash flows for each ILO action every day. If you want to find the calculation for the other actions simply search here.

If you spot an error that merits correction, please contact the publisher at [email protected]. This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell securities and does not take into account your objectives or your financial situation. Simply Wall St has no position in the stocks mentioned.

Our goal is to provide you with long-term targeted research analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive corporate announcements or qualitative material. Thanks for the reading.“data-reactid =” 59 “>If you spot an error that merits correction, please contact the publisher at [email protected] This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell securities and does not take into account your objectives or your financial situation. Simply Wall St has no position in the stocks mentioned.

Our goal is to provide you with long-term targeted research analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive corporate announcements or qualitative material. Thanks for the reading.

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