Dividend Discount Model (DDM)
In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.
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Allergan PLC pages available for free this week:
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Intrinsic Stock Value (Valuation Summary)
Allergan PLC, dividends per share (DPS) forecast
US$
| Year | Value | DPSt or Terminal value (TVt) | Calculation | Present value at |
|---|---|---|---|---|
| 0 | DPS01 | |||
| 1 | DPS1 | = × (1 + ) | ||
| 2 | DPS2 | = × (1 + ) | ||
| 3 | DPS3 | = × (1 + ) | ||
| 4 | DPS4 | = × (1 + ) | ||
| 5 | DPS5 | = × (1 + ) | ||
| 5 | Terminal value (TV5) | = × (1 + ) ÷ ( – ) | ||
| Intrinsic value of Allergan PLC common stock (per share) | ||||
| Current share price | ||||
Based on: 10-K (reporting date: 2019-12-31).
1 DPS0 = Sum of the last year dividends per share of Allergan PLC common stock. See details »
Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.
Required Rate of Return (r)
| Assumptions | ||
| Rate of return on LT Treasury Composite1 | RF | |
| Expected rate of return on market portfolio2 | E(RM) | |
| Systematic risk of Allergan PLC common stock | βAGN | |
| Required rate of return on Allergan PLC common stock3 | rAGN | |
1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).
3 rAGN = RF + βAGN [E(RM) – RF]
= + [ – ]
=
Dividend Growth Rate (g)
Company does not pay dividends.