In this analysis, we quantify the percentage of Yelp's ( YELP ) stock that can be attributed to growth.
We know that a stock's valuation can be highly influenced by future expectations of earnings growth. However, in theory, if a company sees no growth opportunities it should distribute all its earnings as dividends to its shareholders. The only capital expenditure required in such a case will be equal to the amount required to replace or maintain existing assets.
Mathematically, (capital expenditure + change in net working capital + change in net operating assets) = (depreciation and amortization).
We assume that this amount of capital expenditure will be sufficient for the company to retain its market share and keep margins constant. In this case, if the company pays all earnings as dividends for the rest of the period, we can calculate Present Value of Growth Opportunity (PVGO) of a stock from the formula given below:
Have more questions about Yelp? See the links below.
- What's Yelp's Revenue And Earnings Breakdown?
- What's Yelp's Fundamental Value Based On Expected 2015 Results?
- How Has Yelp's Revenue Composition Changed Over The Last 5 Years?
- By What Percentage Can Yelp's Revenues And EBITDA Grow In The Next 3 Years?
- How Big Can Yelp's International Business Become By 2020?
- How The Value Of Reviews Has Grown For Yelp In The Last Two years?
- How Geographic Expansion Helped Yelp Grow its Claimed Business In The Last 5 Years?
- How Important Has Mobile Platform Become For Yelp In The Last 2 Years?
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email firstname.lastname@example.org
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis fo r Yelp