Discounted Cash Flow Calculation for ARCA:SPY using Excess Returns Model Model
The calculations below outline how an intrinsic value for SPDR S&P 500 ETF Trust is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Amount off the current price
SPDR S&P 500 ETF Trust
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
SPDR S&P 500 ETF Trust
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
SPDR S&P 500 ETF Trust's share price is below the future cash flow value, and at a moderate discount (> 20%).
SPDR S&P 500 ETF Trust's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
SPDR S&P 500 ETF Trust's
is considered below, and whether this is a fair price.
Price based on past earnings
SPDR S&P 500 ETF Trust's earnings available for a low price, and how does
this compare to other companies in the same industry?
In this section we usually present revenue and earnings growth projections based on the consensus estimates of professional analysts to help investors understand the company’s ability to generate profit. But as SPDR S&P 500 ETF Trust has not provided enough past data and has no analyst forecast, its future earnings cannot be reliably calculated by extrapolating past data or using analyst predictions.
This is quite a rare situation as 97% of companies covered by Simply Wall St do have past financial data. You can see them here.
Show me the analysis anyway
The future performance of a company is measured in the same way as past
performance, by looking at estimated
and how much profit it is expected to make.
Future estimates come from
professional analysts. Just like forecasting the weather, they don’t always get
Expected Capital Markets industry annual growth in earnings.
Earnings growth vs Low Risk Savings
SPDR S&P 500 ETF Trust
expected to grow at an
Unable to compare SPDR S&P 500 ETF Trust's earnings growth to the low risk savings rate as no estimate data is available.
Growth vs Market Checks
Unable to compare SPDR S&P 500 ETF Trust's earnings growth to the United States of America market average as no estimate data is available.
Unable to compare SPDR S&P 500 ETF Trust's revenue growth to the United States of America market average as no estimate data is available.
Unable to determine if SPDR S&P 500 ETF Trust is high growth as no earnings estimate data is available.
Unable to determine if SPDR S&P 500 ETF Trust is high growth as no revenue estimate data is available.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
SPDR S&P 500 ETF Trust's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
SPDR S&P 500 ETF Trust
has a total score of
3/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
SPDR S&P 500 ETF Trust's finances.
The net worth of a company is the difference between its assets and liabilities.
SPDR S&P 500 ETF Trust's short term (1 year) commitments are greater than its holdings of cash and other short term assets.
SPDR S&P 500 ETF Trust's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of
SPDR S&P 500 ETF Trust's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Low level of unsold assets.
SPDR S&P 500 ETF Trust has no debt, it does not need to be covered by short term assets.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
SPDR S&P 500 ETF Trust is an exchange traded fund launched and managed by State Street Global Advisors, Inc. The fund invests in public equity markets of the United States. The fund invests in stocks of companies operating across diversified sectors. The fund invests in growth and value stocks of large-cap companies. It seeks to track the performance of the S&P 500 Index, by using full replication technique. SPDR S&P 500 ETF Trust was formed on January 22, 1993 and is domiciled in the United States.
Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.