Alphabet Intrinsic Value $315.37 Offers 1.14% Safety, FCF DCF Shows -62.66%
Earnings-based DCF signals intrinsic value of $315.37 with a 1.14% margin of safety versus current price, indicating fair valuation. Free cash flow-based DCF yields $191.66 implying a -62.66% margin of safety, suggesting modest overvaluation.
1. DCF Methodology
The analysis employs a two-stage discounted earnings model using EPS without non-recurring items of $9.17, a 10% discount rate (4% risk-free rate plus 6% market premium), a 25.20% growth rate for 10 years and a 4% terminal growth rate for the subsequent 10 years.
2. Earnings-Based Valuation Results
Under earnings-based assumptions, the present value of the growth stage aggregates to $199.94 and the terminal stage contributes $248.82, resulting in an intrinsic value of $315.37 and a modest 1.14% margin of safety compared to current market levels, indicating fair valuation.
3. Free Cash Flow-Based Valuation Results
A traditional free cash flow DCF, based on trailing twelve-month free cash flow per share, produces an intrinsic value of $191.66, implying a -62.66% margin of safety and suggesting that the stock may be modestly overvalued under cash flow metrics.