In my videos, we talk about current events, we analyze companies, we do a lot of different interesting stuff, but in this video i want to focus on teaching you a skill which i think you should master now when you want to play in the stock market, you Got to be able to evaluate and value companies and there's countless ways to do it. You can do discounted cash flow evaluations, dcfs, which i personally love there's a lot of quant ways to do it there's a lot of technical trading. However, in this video i want to teach you a quick hack, how to get an initial understanding into the true valuation of company within something that takes five to ten minutes max, so you can screen through a lot of companies now. This is by no means a substitute to a proper evaluation of a company, but it should give you an idea of whether the company is overpriced or underpriced, based on some simple and yet objective and trustworthy parameters based on publicly available data with a simple excel spreadsheet, Which i'm going to make available for everybody, not just the patrons, not just the channel members, everybody can go and download it.

I'm gon na put the link in the description. Don't worry about it! It's a very, very simple tool. Now, in this video i'm gon na be using amazon, which is a company, you all know - and you all know their numbers - it's a huge company, so i'm going to be showing you what i think the amazon valuation would be based on this technique. Now this can apply to a huge amount of companies starting from small cap.

Big cap mid cap doesn't matter so i'm going to use amazon just because it's a household name and as always a quick disclaimer, don't click, nothing, don't smash. Nothing don't subscribe, don't buy nothing. Just give me your attention for the next five minutes, because i am about to teach you an important skill which gon na make you money. So listen up and just stay with me for five minutes and trust me.

This is going to help you so step number. One is opening up an excel and creating this very simple table, as you can see right here, the most complicated thing about this table was to add this logo, which i struggled with for 25 minutes. However, all you need to do is create the ebitda flows for year, one through five now below you create this ebitda multiple number and this terminal value and the present value of terminal value. I'm going to explain a second: how to do it, but again: you're gon na have access to this template anytime, so you can just grab mine.

So, as you can see here, the first thing we need to know is the ebitda numbers for amazon for the next five years, so for that we're gon na go to seeking alpha because they're doing a really good job, in my opinion, of aggregating these numbers. So if you go to seeking alpha by the way, i'm not affiliated there's no affiliate link, i just use them because it's convenient okay. So if i scroll down to ebitda right here, i can see that the ebitda for this trailing 12 months was 57 billion dollars. Okay, okay, so let's use 57 billion for year, one if you see 57 million, i didn't have a brain aneurysm.

What happened here is essentially, these are in thousands, it's more convenient for me to do it in thousands. So i'm not confused, but this is just you can do your own thing. So, as you can see, the ebitda is growing every year at about 10. I believe, but this is just a template.

We got ta ascertain then this is essentially step two. What is the ebitda growth rate for amazon for the next five years? For that? We also got to go to seeking alpha because they actually aggregate the wall street consensus. If you go to growth, you'll see that they've done the work for you yeah by the way. You're welcome to do it yourself, you can look it up and you can look up the wall street consensus.

It's not a problem, but you can see right here. Ebitda growth forward, which pretty much is an aggregate of wall street consensus and, as you can see right here, it's 30, so we know that the 30 talks about ebay. That goes specifically for the future. So let's do that.

Let's do 30 right here and, let's just assume just for the caution's sake, because i like to be cautious in these that the rate is going to decline year over year because for whatever reason, amazon is not going to be doing so. Well, just be cautious. So right here we're going to do 25, then 20, then we're gon na do 15 boom. Okay, we got it by the way.

This is not a mistake. We just got ta expend this a little bit right here, okay, so what we did here. Essentially, we applied a 30 growth from this year and then we declined every year by five percent, all the way to 15 growth in 2025. Just to be careful now, as you can see right here, what you would get is the 2026 ebay that would be 140 billion dollars.

So how do we go from the 140 billion the company will or is expected to generate in 2026 to the actual valuation? Well, we need this little calculation right here, so you can use whatever multiple you want for this, but essentially this is called the ebitda multiple evaluation system, we're going to use a number multiply year, five ebitda and bring it back to today to find out. What's the real valuation of the company is, and for this purpose you have to understand that every industry has different ebitda multiples and you don't have to actually research that that deep, there's a website that actually gives you that it's called equidam.com again not affiliated, don't have Any affiliate links and you can research it yourself, but essentially they aggregate the numbers quite nicely and, as you can see right here, tech is a 24.81. That's the ebitda, multiple for tech and obviously, amazon stack, so we're going to use that the link for that is also going to be in the description, so you guys can use it and not research, every single industry. So let's do 24.8 for the multiple.

So now we got 3.4 trillion dollars rather 3.5 trillion dollars. Is that the valuation of the company today? No, we got to bring this money to today, because this is 20 26 dollars now, for that purpose we got to use a certain amount. That's called the discount rate and the way it works is quite simple. Let me just give an example: let's say that you have a settlement, somebody owes you a million dollars in five years.

If you want to cash out today, you're gon na take less money, because you can take that money put in the bank, get interest on that and get a higher amount within five years. So whatever number you're getting today should match a million dollars in five years. Based on bank interest just to keep it simple, so the discount rate, the higher it goes, the less money i get today for the future value of a certain amount of money, and now that you know what discount rate means, i'm going to unhide this row right Here i'm using 10 percent because i think 10 is extremely conservative, giving that we have a nearest zero percent interest rate in the market right now you can use eight and six you'll still be over the line of conservatism, but i like to use extra extra careful Very high disk rate to bring out the valuation to the lowest possible point, so i can have that cushion that if i'm wrong, i have the extra safety cushion. So i use 10 in this market.

So, as you can see right here, you can take a look at the formula and get scared, but don't now what we have is i-36, which is this number, and here the 3.5 trillion dollars that we have in 2026. And now all you got to do is just divide that number and the percentage of discount in the power of the amount of years that you have to bring this back. In this case 2026 minus 2021, which gives you exactly five. That's the whole thing.

It's too complicated for you. You can just use this spreadsheet, which i'm going to give to you and, as you can see here, the bottom result is 2 trillion dollars: 165 billion. If you compare this to the card valuation of amazon, if you go back here, so you can go to amazon and you can go to summary - and you see the market cap right here. So the market cap right here is 1.66 trillion dollars.

So, as you can see right here, based on our estimates, we got 166 trillion currently the card market cap versus 2.965, which is the future market cap. So just based on this very, very, very simple method. In 10 minutes and with me explaining, if i wasn't explaining, probably it would have taken three minutes. We now can see.

Hey amazon might be undervalued. Let's look deeper into this. Let's run some dcfs, let's analyze the margins, let's analyze the business, let's see what's going on, but as a screening mechanism. This thing is extremely effective to weed out the good companies from the bad companies.

In my opinion, and again i might be wrong. This might be inaccurate. This might be the ramblings of amendment. You got to do the research for yourself and there you have it as simple as that.

Unlike what the suits on wall street want you to think this isn't rocket science, it's not that complicated! All you need to do is master a few basic skills and you can do it as good as these guys. Now. This is just my opinion, so you can do your research because i might be wrong. I might be inaccurate, this might be ramblings of a madman.

You got to be able to do the research for yourself, allegedly blah blah blah, so using this tool is going to help you execute on my mantra. So i'm happy now, as always a huge shout out to the channel members, the patrons everybody who's been supporting the channel. Thank you so much if you have any questions on how to use this or you just generally, don't like me, hit me up below. Let me know in the comment section i'll see you guys in the next video.