Verizon Communications Inc. (VZ) Discounted Future Market Cap

Verizon Communications Inc.

VZ (NYSE)

(%)

Valuation
Verizon Communications Inc. Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("quote:close") / data.get("income:eps"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Calculate a linear regression for forecasting revenues
data.compute({
    "linearRegressionRevenue": f"function:linear_regression:income:revenue start:{-assumptions.get('historical_years')}",
}, forecast=assumptions.get("projection_years"))

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"function:compound:{data.get('linearRegressionRevenue:1')} rate:{assumptions.get('%revenue_growth_rate')} offset:-1",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("quote:close"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income",
        "linearRegressionRevenue": "Linear Regression Revenue"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ],
        "hidden_keys": ["linearRegressionRevenue"]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	35.93 USD
Estimated net income	19.67 Bil. USD
Estimated market capitalization	203 Bil. USD
Market capitalization discounted to present	151.7 Bil. USD
Shares Outstanding	4.22 Bil.
Earnings Per Share (EPS)	4.22 USD
Market Price	43.55 USD
Price to Earnings (PE) Ratio	10.34

Historical and forecasted data

Monetary values are in USD

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Edit Chart Values	2025	2026	2027	2028	2029

↳ Growth Rate

Estimated Future Values

amounts of USD except for #	2024	LTM	2025	2026	2027	2028	2029
Revenue	134,788	135,292	136,158	136,983	137,814	138,649	139,489
Revenue Growth Rate	0.608%	0.374%	1.02%	0.606%	0.606%	0.606%	0.606%
Net Income	17,506	17,783	19,198	19,315	19,432	19,549	19,668

Historical Values

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	131,742	135,292	134,788	133,974	136,835	133,613	128,292	131,868	130,863	126,034	125,980	131,620
Cost of Revenue	54,405	54,281	54,097	54,887	59,133	56,301	51,201	54,726	55,508	53,063	52,701	52,557
Gross Profit	77,337	81,011	80,691	79,087	77,702	77,312	77,091	77,142	75,355	72,971	73,279	79,063
Gross Margin	58.7%	59.88%	59.87%	59.03%	56.79%	57.86%	60.09%	58.5%	57.58%	57.9%	58.17%	60.07%
Operating Income	28,619	29,143	28,686	22,877	30,467	32,448	28,798	30,378	22,278	27,425	29,249	33,060
Operating Margin	21.73%	21.54%	21.28%	17.08%	22.27%	24.29%	22.45%	23.04%	17.02%	21.76%	23.22%	25.12%
Net Income	18,539	17,783	17,506	11,614	21,256	22,065	17,801	19,265	15,528	30,101	13,127	17,879
Net Margin	14.1%	13.14%	12.99%	8.67%	15.53%	16.51%	13.88%	14.61%	11.87%	23.88%	10.42%	13.58%

Historical Growth Rates

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	131,742	135,292	134,788	133,974	136,835	133,613	128,292	131,868	130,863	126,034	125,980	131,620
Revenue Growth Rate	0.606%	0.374%	0.608%	-2.09%	2.41%	4.15%	-2.71%	0.768%	3.83%	0.043%	-4.29%	3.57%
Net Income	18,539	17,783	17,506	11,614	21,256	22,065	17,801	19,265	15,528	30,101	13,127	17,879
Net Margin	14.1%	13.14%	12.99%	8.67%	15.53%	16.51%	13.88%	14.61%	11.87%	23.88%	10.42%	13.58%
Net Income Growth Rate	16.71%	1.58%	50.73%	-45.36%	-3.67%	23.95%	-7.6%	24.07%	-48.41%	129.3%	-26.58%	85.76%
Stockholders Equity	66,341	100,722	99,237	92,430	91,144	81,790	67,842	61,395	53,145	43,096	22,524	16,428
Equity Growth Rate	23.06%	1.5%	7.36%	1.41%	11.44%	20.56%	10.5%	15.52%	23.32%	91.33%	37.11%	33.58%
Return on Invested Capital (ROIC)	9.07%	7.16%	7.1%	5.01%	7.17%	7.88%	8.66%	10.83%	8.12%	18.32%	8.99%	10.51%
After-tax Operating Income	23,422	22,702	22,407	16,289	23,437	24,946	22,046	26,443	18,209	40,683	18,966	21,511
Income Tax Rate	17.76%	22.1%	21.89%	28.8%	23.07%	23.12%	23.44%	12.95%	18.26%	-48.34%	35.16%	34.93%
Invested Capital	269,262	317,041	315,746	324,967	326,904	316,515	254,650	244,265	224,154	222,027	210,960	204,653