Valuation Modeling

Built a 3 financial statement model for the first time.

Was a good experience. Helped connect the dots on how different items on the financial statements influence each other on a deeper level.

Definitely want to go deeper next time. This first valuation was on Microsoft because I had some prior knowledge and research, making it easier. Built an IS, BS, and CF projected out over the next 5 years. Along with strong, base, and weak cases.

Did a 2 stage discounted FCF model to arrive at a valuation of $3.56 trillion which is somewhat close to the current $3.39 trillion. Believe the difference is due to the fact that some of my liability accounts may not be predicted as well as just currently accumulating experience.

Accounts such as Long-term debt may have been underpredicted as well as other long-term liabilities (didn’t spend as much time investigating what was included in this category and give it the proper growth treatment). Revenue growth rate could have been possibly higher in return.

Hope to get deeper into the weeds in the next model, for example, implementing a debt schedule, interest schedule, and truly research each item to better predict how they might play out in the future in a company-specific sense rather than using industry-wide or general trends. Need to research the company much deeper to have better justifications for each growth rate, margin ratio, etc. Also would be interested in doing something more mathy such as some sort of risk variance curves rather than just a 3 case pick-and-choose graph.

Overall, still very new so need to keep digging deeper. Have a great weekend!