Calculating The Fair Value Of Core Laboratories Inc. (NYSE:CLB)

In This Article:

Key Insights

  • The projected fair value for Core Laboratories is US$24.54 based on 2 Stage Free Cash Flow to Equity

  • Core Laboratories' US$20.13 share price indicates it is trading at similar levels as its fair value estimate

  • The US$20.43 analyst price target for CLB is 17% less than our estimate of fair value

How far off is Core Laboratories Inc. (NYSE:CLB) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.

Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.

Check out our latest analysis for Core Laboratories

Is Core Laboratories Fairly Valued?

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

Levered FCF ($, Millions)

US$46.1m

US$53.0m

US$56.0m

US$64.0m

US$69.1m

US$73.6m

US$77.4m

US$80.9m

US$84.1m

US$87.1m

Growth Rate Estimate Source

Analyst x3

Analyst x1

Analyst x1

Analyst x1

Est @ 8.03%

Est @ 6.41%

Est @ 5.27%

Est @ 4.48%

Est @ 3.92%

Est @ 3.53%

Present Value ($, Millions) Discounted @ 8.3%

US$42.6

US$45.2

US$44.1

US$46.6

US$46.5

US$45.7

US$44.4

US$42.8

US$41.1

US$39.3

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$438m

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