Thread by @gianlucac1

#COVID19 and economic impact 3d
Many asking what is the impact
ECONOMIES: Dunno yet but for sure a multiple of the laughable 0.x% estimates seen so far

ASSETS: what is the value of assets? Well for me it is the Net Present Value of the sum of forecastable Free Cash flow (FCF)+

+ something valuation folks like me call Terminal Value which is circa the perpetuity of a normalized/defendable FCF after maintenance capex.

so a kind of 2 stage model 4 years+TV no growth
W=NPV (FCF1+FCF2+FCF3+FCF4 +FCFn) where the discount factor can be any choosen Wacc

In any model the NPV of FCFn is circa 80% of the valuation, if not more.

Which is why when i have the privilege of a market valuation, i prefer reverse engineering a la damodaran to see which is the implied growth in prices

so what is #covid19 doing to W? (being W not market value but intrinsic value)

#covid19 will affect FCF1 and FCF2 for sure, but could also affect the entire business model (supply chain and so on) endangering FCFn as we dont know yet full implications

that is why u see volatility asset prices.

cheers

@ThManfredi @FPanunzi