Intrinsic value

jd1888

Active member
175 6
Hi all,

Looking for a few pointers here. I tried to calculate Apples (aapl) intrinsic value using Benjamin Graham’s formula.

IV = EPS x (8.5 +2g) x 4.4 / Y


IV = Intrinsic Value
EPS = Diluted Earnings Per Share
8.5 = Fair Price to Earnings Ratio for No Growth Company
(This implies a 11.76% earnings yield)
G = Conservatively estimated growth in EPS for the next 7 to 10 years
4.4 = The average yield for high grade corporate bonds in 1962 when the model was introduced
Y = The Current Yield on AAA Rated Corporate Bonds

The IV I came up with is $2160.70

Using these figures: #
EPS 44.11 2012 estimate with one quarter to go. Source CNBC
8.5 the standard as above.
G being 16.3, I came up with this figure by
averaging the the EPS growth from 2006 to 2012 then dividing by 4 then * by 2 as the formula asks.
The 4.4 I changed to 2.92.
Y being 2.45 the yield for Mobil Corporation bonds 7 to 10 year maturity.

Now my questions are:

Do I have this worked out correctly?
If so doesn't the figure in red seem rather crazy and ridiculous?
Or is it completely achievable and if so how?
 
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock