HELP VERY LOST :((((

For the company you chose in Part 1, use concepts learned about present value to estimate a value of the company's stock. See P7-3 in Week 3's Homework to get an idea of what you should do, as well as my posted example. Note that you will need to estimate the appropriate cost of capital or discount rate for your analysis based on the firms risk, based on its industry and individual characteristics. You will also need to estimate a growth rate for the firm's Dividend, as well as finding what Dividend they have been paying (perhaps past Dividend history can help in estimating a growth rate). Once you estimate the Stock price, compare it to the actual stock price from current markets.

FOR THE COMPANY ETSY!

-rate of return

-growth rate on dividends

DATA:

ROE: 132.78% as of 6-30-23

Etsy does not pay dividends

Etsy, Inc. had a return of -46.74% year-to-date (YTD) and -33.87% in the last 12 months. Over the past 10 years, Etsy, Inc. had an annualized return of 17.84%, outperforming the S&P 500 benchmark which had an annualized return of 8.89%.

Stock USD64.72

Etsy free cash flow for the quarter ending June 30, 2023 was 175.45, a year-over-year.

Free cash flow was 652, 869 in 2022

Etsy ROI - Return on Investment Historical Data
Date	TTM Net Income	Return on Investment
2022-06-30	$0.38B	12.89%

Net profit: Etsy net income for the twelve months ending June 30, 2023 was $-0.717B, a 274.59% decline year-over-year. Etsy annual net income for 2022 was $-0.694B, a 240.68% decline from 2021. Etsy annual net income for 2021 was $0.494B, a 41.31% increase from 2020.

EXAMPLE:

RESEARCH PAPER PART 3 EXAMPLE Two of the first things you will wart to do is to find the required rate of return (r), and the growth rate in dividends (g). Note that if r>g3 you are in luck and can do the simple model analysis like Homework Problem 7-3. The posted homework solution would be a good example. Note that you want to add to it a comparlson of your calculated value to the actual stock price, and discuss any difference. IF HOWEVER, rg, we neod to make some adjustments. AGAIN NOTE: IF R>G FOR YOUR COMPANY, YOU DO NOT NEED THIS ADDITIONAL ANALYSIS - YOU CAN DO THE MORE SIMPLE ANALYSIS LIKE P7-3! So I need to forecast dildends cut to a point that I believe r>9. To determine this I can scroll down in the Dividend tab to get the actual dividends. Note that they are quarterly, so I add them up for yearly amounts. Estimation of Growth, based on Dividends: The percentage growth was determined for each year by dividing one year by the previous year and subtrocting one to convert into a percentage and then the average was determined by adding up the growth for each year and dividing by the number of years. Consulting Gurufocus again, we see that the 5-year growth rate was 17.8%, the 3-year growth rate was 16.0% and the 1 -yesr growth rate was 15.2% so we see it is declining by 0.8%/ year. Based on this, I assume it will continue to dedine 0.8% each year. That would give the following growth rates and thus future estimated Dividends: After 5 years, the dividend growth rate is less than the Average ROE of 14.6, so I assume it will stabllize at 11.2%. Next we need to estimate the value of the dividends in years 1 through 4: PV(Di)=(1+r)9DiPV(D1)=(1+0.146)32.42=2.11PV(D2)=(1+0.146)22.76=2.10PV(D3)=(1+0.146)33.10=2.06PV(Di)=(1+0.146)43.48=2.02 Then for year 5, we un the Dividend growen model to calculate the value for the rest of the firm's life. Plugging these into the OWhidend Growth model, in year 5 we get: Constant growth model =P0=rgD4(1+g) Constant growth model =P3=rg4D4(1+g5)=(0.1460.112)3.48(1+0.112)=113.82 Then to dscoune, this your 5 value to todor. PV(P1)=(1+r)PfPV(P5)=(1+r)5P5=1.1463113.82=57.58 Thus, adang up the present values, our estimete of the stodk value is: P1=P(D1)+P(D2)+P(D1)+PV(D1)+P3=2.11+2.10+2.06+2.02+57.58=5.55 Looking up the current maktet price of the stod, ne find it was $50.25 on December 31, 2019 (wa used evidends through the end of 2019). Compering this to 1) The stock is trily under-valued and would be a good stock to sel, or 2) Our estamate of the growth rate or required rebum are incorrect. 3) Recent news everts could indicate a future change in eernings that we did not predict. In this case, I would atsume my estimetes to be the likely cause, since we were not sure of the longterm growth rate. But, in general, our ettimate was dose. CLSS: Addional notes 1) Maice sure you une data for your company. 2) Be sure you stabe your sources for the dota you gather. 3) Try to show your caloulations. 4) Again, if you are ludy, the growth rate wil be less than the required return, and you can fust use the simple equation: Constantgrowthmodel=P8=rgD0(1+g) 5) If the growth rate is higher than the required return, you need to do the extended analyis like t did above. 5) In some cases you moy have a compary that currently issues no dildend. In this case you may use Earnings per shere (EPS) in place of Dvidends, or betber yet, calculate cash flow per share. A problem arises if these are negative though, and then you moy want to calalote the volve anywoy and discuss pithalls of the model. 7) Make sure you do compare your colculated value to the actual price and state what condurions you draw. RESEARCH PAPER PART 3 EXAMPLE Two of the first things you will wart to do is to find the required rate of return (r), and the growth rate in dividends (g). Note that if r>g3 you are in luck and can do the simple model analysis like Homework Problem 7-3. The posted homework solution would be a good example. Note that you want to add to it a comparlson of your calculated value to the actual stock price, and discuss any difference. IF HOWEVER, rg, we neod to make some adjustments. AGAIN NOTE: IF R>G FOR YOUR COMPANY, YOU DO NOT NEED THIS ADDITIONAL ANALYSIS - YOU CAN DO THE MORE SIMPLE ANALYSIS LIKE P7-3! So I need to forecast dildends cut to a point that I believe r>9. To determine this I can scroll down in the Dividend tab to get the actual dividends. Note that they are quarterly, so I add them up for yearly amounts. Estimation of Growth, based on Dividends: The percentage growth was determined for each year by dividing one year by the previous year and subtrocting one to convert into a percentage and then the average was determined by adding up the growth for each year and dividing by the number of years. Consulting Gurufocus again, we see that the 5-year growth rate was 17.8%, the 3-year growth rate was 16.0% and the 1 -yesr growth rate was 15.2% so we see it is declining by 0.8%/ year. Based on this, I assume it will continue to dedine 0.8% each year. That would give the following growth rates and thus future estimated Dividends: After 5 years, the dividend growth rate is less than the Average ROE of 14.6, so I assume it will stabllize at 11.2%. Next we need to estimate the value of the dividends in years 1 through 4: PV(Di)=(1+r)9DiPV(D1)=(1+0.146)32.42=2.11PV(D2)=(1+0.146)22.76=2.10PV(D3)=(1+0.146)33.10=2.06PV(Di)=(1+0.146)43.48=2.02 Then for year 5, we un the Dividend growen model to calculate the value for the rest of the firm's life. Plugging these into the OWhidend Growth model, in year 5 we get: Constant growth model =P0=rgD4(1+g) Constant growth model =P3=rg4D4(1+g5)=(0.1460.112)3.48(1+0.112)=113.82 Then to dscoune, this your 5 value to todor. PV(P1)=(1+r)PfPV(P5)=(1+r)5P5=1.1463113.82=57.58 Thus, adang up the present values, our estimete of the stodk value is: P1=P(D1)+P(D2)+P(D1)+PV(D1)+P3=2.11+2.10+2.06+2.02+57.58=5.55 Looking up the current maktet price of the stod, ne find it was $50.25 on December 31, 2019 (wa used evidends through the end of 2019). Compering this to 1) The stock is trily under-valued and would be a good stock to sel, or 2) Our estamate of the growth rate or required rebum are incorrect. 3) Recent news everts could indicate a future change in eernings that we did not predict. In this case, I would atsume my estimetes to be the likely cause, since we were not sure of the longterm growth rate. But, in general, our ettimate was dose. CLSS: Addional notes 1) Maice sure you une data for your company. 2) Be sure you stabe your sources for the dota you gather. 3) Try to show your caloulations. 4) Again, if you are ludy, the growth rate wil be less than the required return, and you can fust use the simple equation: Constantgrowthmodel=P8=rgD0(1+g) 5) If the growth rate is higher than the required return, you need to do the extended analyis like t did above. 5) In some cases you moy have a compary that currently issues no dildend. In this case you may use Earnings per shere (EPS) in place of Dvidends, or betber yet, calculate cash flow per share. A problem arises if these are negative though, and then you moy want to calalote the volve anywoy and discuss pithalls of the model. 7) Make sure you do compare your colculated value to the actual price and state what condurions you draw