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When viewing the graph on the max length of time, FreeTrade is not showing the correct stock price before 2018, as Rightmove had a 10 to 1 stock split in 2018. Freetrade is not correctly formatting this and just looks like the stock price tanked 85%
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Absolutely solid investment in my eyes, greatest house buying/renting platform and I’ve moved alot of times 
Can someone calculate a fair share price please? 
I’ve tried to calculate this with 2 different formulas (DCF style) and I’ve gotten:
ÂŁ190.98 (50% margin of safety)
ÂŁ310 (50% margin of safety)
I think there may be 2 things wrong with my calculations:
- The shares are priced in pence, but I can’t see how this would affect my calculations as I think all of my statistics are in £ (the websites I used did not confirm this. I.E. Yahoo Finance / Morningstar / MSN Money)
- They did a 10-for-1 stock split and their shares may be diluted, I am not sure how this will affect my calculations though.
The statistics I used are:
| EPS ttm | 17.6 |
|---|---|
| EPS Growth Rate | 19.00% |
| Minimum rate of return | 15% |
| Margin of saftey | 50% |
| Future P/E Ratio | 38.11 |
| EPS for 10 years | 100.2264347 |
The EPS growth rate was calculated with:
When I look at what the analysts say (14%) the final share price is still super high.
Would very much appreciate someone with more knowledge working this out or correcting me 
Unless RIghtmove is really the most undervalued stock of this century in discount cash flow analysis
PS I will mention / quote you in my blog, as I clearly suck at this kind of analysis 
Okayy, I wrote up a blog post on Rightmove If you include my (probably incorrect) valuation model this is likely the most undervalued company in the history of Business 
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Nice piece, I think your research into the business is really good, but you probably don’t need to spend so much time worry about little things like their infrastructure stack, AWS < Terraform < Docker < K8s is a pretty standard implementation and either way their hosting/infra probably won’t make or break the business.
Unfortunately your valuation has a few big gaps, firstly you are looking in pence-GBX rather than ÂŁGB. That ÂŁ804 is really ÂŁ8.04 (your EPS figure where you started should be in pence), the same is true for the other examples.
Sorry I didn’t see your post beforehand, but here are a few pointers:
Terminal value
When you are trying to find a fair value for a high growth stock you’ll model the growth over a number of years then come up with a terminal value either using an exit multiple or some terminal growth rate (the growth rate you expect to continue forever). 23.7% is not a realistic terminal growth rate, any terminal growth rate > your discount rate effectively breaks your model, something like 3% would be more typical.
A p/e of 47 or 38…11 is not really a suitable exit multiple, because you are effectively modelling massive growth in perpetuity, we could only expect a multiple like that if the business was still growing massively.
Growth
Based on my very crude estimate Rightmove currently makes ~ÂŁ357 revenue per house sold in the UK (regardless of if it goes though RM or not). You assume they will grow to ~7x that in 9 years (and still be growing at 23.7%) - that translates to ÂŁ2,421 for every house sold, even with 100% market share that seems unrealistic. You mention agents are hesitant to spend more, but you are modelling them spending ~7x more which is massive.
Discount Rate
15% is a massive discount rate (minimum rate of return) to use, at the moment something in the 6-8% range is probably more appropriate depending on the business/cost of capital.
I’d take a look at some of Damodaran’s intro to valuation videos for how to build up a DCF.
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Will check this video out. I’ve watched a few of his lectures, but never done a DCF analysis myself. Never fully understood it and I’ve been reading about and investing for a few years.
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Haha you’re right, the problem is that I am personally a lover of infra and I love reading up about how businesses implement themselves
Thank you so much for the pointers, I appreciate it so much
Disagree with that. I might not find data that no one else has seen, but I can certainly make inferences that other people can’t. I’ve got industry knowledge, my own specialised professional qualifications, and longer investing horizons than most analysts account for.
I’ve started watching the above videos. I understand what a DCF is, don’t fully understand cash flow, but I’m looking to do some of these models myself when I’ve learned more about it.
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I think this could work as a thread where people, including myself, can talk and learn about company valuations in the abstract sense. I don’t want to steal your post as the catalyst
2022 might be a tougher market to negotiate so adding better technical skills is something many investors might be needing to do.
If you’d like to feel free to make a thread on it. To be honest I’m not sure if there is massive appetite for it, but I guess we won’t really know without trying.
Frankly I don’t really feel like I know enough to write about it in much detail (which is why I tend to just point to The Dean’s videos a bit of a cop out) but I’ll try and contribute where I can if there is interest.
Perhaps making some of my old ASML, TSMC and AMD models a bit more presentable to use an an example would be a start, it’s a bit tricky because it’s hard to share a model without giving an implicit price target.
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Half year report was released this morning
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Rightmove is in the top ten of Smithsons. Hence smithsons investment managers dont think its overpriced. I have no opinion other than Smithson are on average right.