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Thomas Cook Share Discussion Threads
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|Interesting read jonesy. Thanks for sharing.....future value ..all things considered.....could be higher again!!!!K|
|An intrinsic value calculation for Thomas Cook Group plc (LSE:TCG) shows its 31% undervalued
Al Bentley October 20, 2016
I am going to run you through how I calculated the intrinsic value of Thomas Cook Group (LSE:TCG) by taking the expected future cash flows and discounted them to the value today. Discounted Cash Flow or DCF is a direct valuation technique that values a company by projecting its future cash flows and then discounting them to todays money. It sounds complicated, but actually it is quite simple!
Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Please also note that this article was written in October 2016 so be sure check out the updated calculation.
View our latest analysis for Thomas Cook Group
I’m using the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have perpetual stable growth rate. To start off with we need to foresee the next 5 years of cash flows, where possible I use analysts estimates but when these aren’t available I have extrapolated the previous Free Cash Flow (FCF) from the year before. For this growth rate I used the average annual growth rate over the past 5 years, but capped to a reasonable level. We then discount this to its value today and sum up the total to get the present value of these cash flows.
Please note that the numbers here are in millions apart from the per share values.
5-year cash flow forecast
2016 2017 2018 2019 2020
Levered FCF (GBP, Millions) £112.00 £180.33 £225.33 £213.62 £202.51
Source Analyst x2 Analyst x3 Analyst x3 Extrapolated @ (-5.2%) Extrapolated @ (-5.2%)
Present Value Discounted @ 13.37% £98.79 £140.29 £154.62 £129.29 £108.11
Present value of next 5 years cash flows: £631
The 2nd stage is also known as Terminal Value, this is the cash flows to the business after the 1st stage. The Perpetuity Method (Gordon Formula) is used to calculate Terminal Value at an annual growth rate equal to the 10 year government bond rate of (0.9%).
Terminal Value = FCF2020 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = £203 × (1 + 0.9%) ÷ (13.4% – 0.9%)
Terminal value based on the Perpetuity Method where growth (g) = 0.9%: £1,634
Present value of terminal value: £872
The total value or equity value is then the sum of of the present value of the cash flows.
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value = £631 + £1,634 = £1,503
To get the intrinsic value we divide this by the total number of shares outstanding, or the equivalent number if this is a depositary receipt or ADR to get the intrinsic value per share.
Value = Total value / Shares Outstanding (£1,503.15 / 1,542.20)
Value per share: £0.97
To finish off with if we compare the intrinsic value of £0.97 to the current share price of £0.676 we find Thomas Cook Group (LSE:TCG) is quite undervalued at a 31% discount to what it is available for right now.|
|Good call glenol. I took a break even sell. I'm on the sidelines at the moment. Watching closely for a break either way.|
|Nr 200 year old established brand being acquired for less than ten years earnings, whatever next.|
|Impressive share price move. However cashed in for nice 5 day profit. Will look to buy in if it drops below 67p. Takeover looks a strong possibility|
|4.7% up at 10am, wonder what's driving the price?
|strong blue morning so far.....!
|Sounds good manics....will keep an eye on this news.....be good to see the share price moving again i must say.K|
@walshdominic Oct 14
Morgan Stanley's Jamie Rollo says of Thomas Cook shareholder Fosun: "We think it is plausible that 10% could no longer be the ceiling."
If a TR1 confirms in due course then TCG will motor. Fosun began buying at 120-150p iirc.|
|Good luck Sal. Thanks for sharing. Keep a close eye on TCG as things can change so fast. However it all seams very stagnant at the moment.Im still holding and waiting.K|
|I'm out, small loss but I just feel that they are going to struggle in the short term.
I guess that if the next update is good I would look to re enter.|
|Plus, there is bound to be a strong bottom support to this and other UK listed shares as "lower share price + crashing GBP" means HUGE bargain for IIs with USD cash piles.|
|Business is working also much more long term. Apple is not going to dramatically increase the price of an iphone -- any customers they lose during this potentially temporary dip in GBP currency may not come back to them when the GBP rises again.
Business is interested in repeat business above all.|
|But the company is diversifying into markets that enable the Chinese to travel into Europe and Britain. Personally I think they have got this right.
Peeps still went on holiday when the pound was last at these levels during the 84/85 miners strike|
|Brits are a massive % of tourists abroad, it's not like they can be easily replaced with other nationalities -- things aren't going exactly well in EU/Russia land either. Capitalism will prevail and a pricepoint will be found to keep the Brits coming.
Same with wine etc. UK is a huge consumer of French wine. Any kind of significant drop in UK imports will ruin French winemakers. If anything the prices of wine have been dropping and they are non-stop on promotion since Brexit.|
|Yes. Including directors of the company who were buying well above the £1 mark.Time will tell.K|
|the serious drop in the value of the £ is going to materially push up the price of package holidays so demand side is going to be a bit weak.
Probably the best scenario for most holders would be a takeover by Fosun but I am guessing that a takeout price of around £1 would leave a lot of holders well under water.|
|I thought we had left the low/mid 6o,s behind and were now comfortably in the 70,s all thing considered.. obviously not.My recent purchase at 72p is looking sick.And with the ftse hitting record highes. I cant see it reflected in the stock i hold or indeed watching..... Grr.:/K|
Seriously considering selling my recent 70p buy, looks like 60p again.|
|Monarch turbulence over as licences renewed
|Market hitting record highes today. Pity its not reflected in any of my holdings especialy TCG.....K|
|Guys, TCG reached nearly 200 when the POO was double today's, well above $100
The travel industry in UK has been growing year on year *despite* the financial crash, vulcanos, terrorism, Daily Mail featuring TCG on a nearly daily basis during the kids death case.
In the short term a crashing pound is good because: TCG is hedged and the most pressing loan is in GBP so they should be able to pay it off quicker now.|
|:)Keeping the faith.Just.K|
|buy when everyone else is screaming|