The black line shows the historical development and the dotted line shows the main case assumed future development. The below image shows the historical and the assumed future adjusted EBITDA with uncertainty assumptions. The Equity Analysis Model calculates multiple scenarios based on these standard deviations. Calculated historical standard deviation in costs is 3.15%. Calculated historical standard deviation in revenues is 4.38%. In this example, they are automatically calculated based on the historical financial data. The Equity Analysis Model allows to include uncertainty assumptions in the forecast, that is, standard deviations and correlations. That is, the fair value per share is about $114 (the column to the right). The below image shows the calculated fair value per share based on the assumptions above, and assuming 132.8 million shares. The below chart shows the historical and the assumed future earnings per share and cash earnings per share, assuming unchanged number of shares outstanding.īased on the discounted cash flow valuation method, assuming a weighted cost of capital of 8% and perpetual growth of 4% from the end of 2018. The below chart shows the historical and assumed future adjusted EBITDA. Historical data with dark blue columns and the forecasted data with light blue columns. The below chart shows the historical and the assumed future revenues. The below statements summarizes the forecast. I have not included an increase in the number of shares outstanding as a result of the stock-based compensation.Īll the statements and charts below are calculated in the Equity Analysis Model and based on the assumptions above. In my forecast the negative balance sheet effect from stock-based compensation appears as shrinking long-term assets instead of as accrued liabilities. Important! I have used adjusted EBITDA to reflect that stock-based compensation is not a cash cost. I have assumed capital expenditures to be more like consensus forecast. In this analysis, all the long-term assets are input as fixed assets in the Equity Analysis Model. The total depreciation rate is calculated to 37% to cover depreciation of fixed assets, amortization of goodwill and intangibles, and to cover the non-cash effect from the stock-based compensation. I have assumed a quarterly revenue growth of 4.8% and a quarterly cost growth of 4.4% to reflect consensus forecast. The forecast assumptions are generated from the historical development and manually adjusted to reflect current consensus forecast. The below image from the Equity Analysis Model shows the forecast assumptions used in the calculation. The below image shows LinkedIn consensus forecast from. The below image shows the extrapolation assumptions chosen.Īfter having automatically generated forecast assumptions based on the historical development I then manually change some forecast assumptions to reflect the consensus forecast. I will change some of the forecast assumptions further down in this analysis. It also will calculate historical standard deviations and correlations used in the analysis to create fan charts and distribution charts.
This will create forecast assumptions based on the most recent quarter and the historical trends. I then clicked the Generate forecast button to create an analysis based on extrapolation of the historical development. Important! I have used reported adjusted EBITDA. The below image shows the historical financial data copied from LinkedIn's spreadsheet and pasted into the Equity Analysis Model. I have copied historical financial data from LinkedIn's Interactive Analyst Center. I have used the Equity Analysis Model from to generate this analysis. I will create a forecast based on LinkedIn's historical financial performance and current consensus forecast. Number of shares outstanding have been increasing with about 5% each year. The below chart fro m YCharts shows the number of shares outstanding. More information about LinkedIn on their Investor Homepage. LinkedIn is the biggest business-oriented online social networking service.
That is, LinkedIn is relatively expensive at these levels. This also is due to their seemingly generous stock compensation plan. However, current share price implies that LinkedIn needs to execute better than the relatively demanding consensus forecast. LinkedIn also reported OK Q1 numbers at the end of April. After LinkedIn's (NYSE: LNKD) share price plummeted in February the share price has risen steadily.
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