Question

What is your assessment of Facebook’s prospect and intrinsic stock value?

Answer 1

We use the below method for calculating the instrisic value of the share

This method smooths out the free cash flow over the past 6-7 years, multiplies the results by a growth multiple, and adds a portion of total equity.

Value = ((Growth Multiple)*Free Cash Flow(6 year avg) + 0.8*Total Equity(most recent))/Shares Outstanding (Diluted Average)

In the case of negative total equity, the following formula is used (see the Total Equity section for the reason):

Value = ((Growth Multiple)*Free Cash Flow(6 year avg) + Total Equity(most recent)/0.8)/Shares Outstanding (Diluted Average)

Intrinsic Value	=	(Growth Multiple	*	Free Cash Flow(6 year avg)	+	Total Equity(Dec17)	*	0.8)	/	Shares Outstanding (Diluted Average)
	=	(14.8626533105	*	7604.83333333	+	74347	*	0.8)	/	2962.000
	=	58.24

Intrinsic value of face book shares are $58.24

The Actual value = $166.36