Intrinsic Value (Factored In 4, 10 & 14 Years Risk) : Case Study — PDD
The longest bull market in history was the post-2008 bull run, which lasted over a decade (roughly 2009–2020), driven by technology stocks and economic recovery. Conversely, the longest bear market was triggered by the 1929 stock market crash, lasting over 4 years and leading to the Great Depression.
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Let's say a stock is having Present Intrinsic Value.
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To factor in the risk of 4, 10 & 14 years respectively :
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(I)
Intrinsic Value
(Factored In 4 Years Risk)
= Present Intrinsic Value ÷ (1 + CICC_Ratio)^4
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(II)
Intrinsic Value
(Factored In 10 Years Risk)
= Present Intrinsic Value ÷ (1 + CICC_Ratio)^10
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(III)
Intrinsic Value
(Factored In 14 Years Risk)
= Present Intrinsic Value ÷ (1 + CICC_Ratio)^14
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Where,
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CICC Factor
= Clean Invested Capital Cost Factor
= 30Y Government Bond Yield Factor × (1 + D/E × (1 + Prime Ratio + Spread Ratio) ÷ (1 + D/E)
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CICC_Ratio
= CICC Factor - 1
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Case Study:
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PDD
(Fin.2025.Sep.Q3.TTM)
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(A)
Business FCF Power Value Per Share
= FCFPS ÷ CICC Ratio
= 10.52÷0.0530582524
= USD 198.2726440988
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(I)
Business FCF Power Value Per Share
(Factored In 4 Years Risk)
= 198.2726440988÷(1+0.0530582524)^4
= USD 161.2327326744
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(II)
Business FCF Power Value Per Share
(Factored In 10 Years Risk)
= 198.2726440988÷(1+0.0530582524)^10
= USD 118.2330354334
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(III)
Business FCF Power Value Per Share
(Factored In 14 Years Risk)
= 198.2726440988÷(1+0.0530582524)^14
= USD 96.1455650222
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(B)
Common Shareholders FCF Power Value Per Share
= 1÷(1+0.03)×198.2726440988
= USD 192.4977127173
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(I)
Common Shareholders FCF Power Value Per Share
(Factored In 4 Years Risk)
= 192.4977127173÷(1+0.0530582524)^4
= USD 156.5366336645
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(II)
Common Shareholders FCF Power Value Per Share
(Factored In 10 Years Risk)
= 192.4977127173÷(1+0.0530582524)^10
= USD 114.7893547897
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(III)
Common Shareholders FCF Power Value Per Share
(Factored In 14 Years Risk)
= 192.4977127173÷(1+0.0530582524)^14
= USD 93.3452087594
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(C)
Debtors FCF Power Value Per Share
= 0.03÷(1+0.03)×198.2726440988
= USD 5.7749313815
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(I)
Debtors FCF Power Value Per Share
(Factored In 4 Years Risk)
= 5.7749313815÷(1+0.0530582524)^4
= USD 4.6960990099
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(II)
Debtors FCF Power Value Per Share
(Factored In 10 Years Risk)
= 5.7749313815÷(1+0.0530582524)^10
= USD 3.4436806437
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(III)
Debtors FCF Power Value Per Share
(Factored In 14 Years Risk)
= 5.7749313815÷(1+0.0530582524)^14
= USD 2.8003562628
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Reference:
https://open.substack.com/pub/absolutetoal/p/distributable-free-cash-flow?utm_source=share&utm_medium=android&r=5g11d4
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