 Welcome to the channel. This is reliable Rudy and today we're going to go over a simple discounted cash flow example We're going to stick with Apple because we've used Apple in the last couple of videos But first and foremost, I'm not a licensed financial advisor Everything in this video contains merely my opinion and is for entertainment purposes only so go in the Apple We're starting with revenue growth. How can I decipher? What type of revenue growth I want to project in Apple going into the next 10 years? So it's simple I go to Apple's revenue growth Now I'm looking at the years 2015 to 2020. I can see very consistent growth nothing out of the ordinary very consistent From 2020 through 2021 their revenue skyrocketed now you got to ask yourself What happened in the year 2021? They printed a lot of stimulus checks a lot of people had money to go buy stuff Apple Looking at this revenue growth on Apple It is very easy to see that Apple benefited greatly from stimulus checks and people having money to spend Is that going to be the case going forward my job when putting in these numbers is to be as conservative as possible So I'm actually going to go more so off of these from 2015 to 2019 2020 range where their profit margins are roughly are not profit margins their revenue growth is right in those Mid-single digits to maybe 10% Right around there this down here at the bottom shows the year over year growth So from 2016 to 2018 I can see they grow 3, 4, 7, 12, 12, 15, 17, 19 Okay, that's a very solid growth after that large after that solid growth right in here You can see it flattens out over the next couple years and then 2021 came along stimulus checks a lot of people had money boom Look at that growth is that growth sustainable? That's what you have to ask yourself So looking at this You know, I think it's possible that they are kind of plateaued for the next couple years going forward But this is a 10-year analysis. I have to try and decipher a ballpark average over the next 10 years What is Apple going to grow over the next 10 years? So looking at that I'm going to stay conservative in those a mid-single digits to double digits and we're gonna go Five seven point five and ten. I think this is reasonable for Apple. I think Apple has very large moat Do I think they've kind of plateaued on revenue for the short term? Yes, I do but I think that rev that Apple is gonna do a good job of Reaching out to their customers and growing their revenue over a 10-year analysis So next line that we're going to go over is profit margins. So on this micro trends, I would go to margins And now I can see that same 2015 the 2020 range now. I want to look at the net the net profit margins. I Can see they're consistently in these low 20s Consistently in these low 20s 21 2021 came along and Boom huge skyrocket and revenue now. I wonder why that is 2021 they printed a bunch of stimulus checks People had money to spend Clearly Apple benefited greatly from this Apple huge moat. Everyone has Apple products And it's almost almost everyone has Apple products if they have money to spend Apple is going to benefit greatly from that now is this growth right here sustainable Has it leveled out? Are they going to consistently be at this 26? I don't know. My job is to be conservative I can see from the year 2013 To 2020 they're consistently in these low 20s So I'm going to be a little bit conservative and probably go to that 20 to mid 20s level Because I could see this kind of leveling out And then finding a ballpark average To consistently build off of So for this revenue growth, I'm going to use 20 22 24 now if I was actually being conservative I would probably use 21 and a half And 23 so we'll stick with that now free cash flow margins. This basically goes off of operating I can see they're operating margins You know it decreased quite a bit and then we got back into this medium average right here Yeah, you know, it's tough. It sometimes it's tough a lot of times I just use the same margins that I use for profit margins But I can see that their operating margins are a little bit higher So I will be a little bit more generous on the free cash flow margin and we'll go 22 23.5 and 25 Now for pe I can go to price ratios Now I can see pe ratio over the course of this time now. I can see from that same time period 2014 to 2020 You know, they traded under a 20 pe actually The last two years are the only time the apples ever traded over 20 over the last 10 years. That is So for this pe metric, do I want to Especially with the year 2021 when there's stimulus checks and a lot of people have money to spend You can see each one of these charts represents that they benefited massively from that. Are they is this growth going to continue? pot I personally don't think so You know, I'm not an apple hater. I have nothing against apple My job is to take the same approach for every company that I'm evaluating So I'm going to use these mid teams Probably up to those those high 20s now another thing that you can do is you can adjust these price to earnings ratios And price of pre-casual ratios based on the revenue growth that you're projecting So for a 5% revenue growth You know, I'm okay paying a 14 pe for that growth now for seven and a half percent revenue growth I'm going to pay a little bit higher. So I'll pay a 16 Now for 10 revenue growth You know, I'm okay paying an 18 now. You could also say apple. They have a huge moat I I'm okay paying a higher pe if I'm buying apple. Okay. Now if that's the scenario and you have a personal Love with apple. I have nothing against that. You can maybe raise these margins up to 16 18 20 But I would not project anything higher than 20 Especially looking at that chart that I just looked at on microtrans Now we'll stick with this for the example and we'll go 16 18 and 20 Now desired annual return I want to get a 15 percent return with any individual company that I'm buying Because if I'm not getting that 15 percent return Then I'm simply going to buy vt and vx us Because I don't have to think twice about buying those those ETFs Browdy diversified index funds. So I need that extra incentive To go away from buying those ETFs to buy this individual company Now I hope that makes sense and if it doesn't make sense make sure you leave something in the comments But also having this desired return at 15 percent It actually adds a little bit more margin of safety into my calculation So we're going to hit analyze on this and you're going to see okay Here's my first ballpark range that I am going to be very interested in apple Second and third Yeah, I know I think it's possible that apple could potentially trade down here. I know that sounds crazy But you know, I've seen crazier things happen in my day and I haven't been an investor that long So what I do with this calculation. Let's say I want to know Exactly when apple hits 121 dollars and 89 cents. I could hit this add button Add it to watch list now. This is going to notify me exactly when this gets to this price range So let's say over the next couple months apple goes from 151 dollars and then it trades and then I get notified down here at 122 Okay, apple's hit my price target. What do I do? I go I dive deeper into the company I reevaluate the company and see if my projections have changed Maybe they've come on with an earnings report over this course of the time And something's changed in my valuation and who knows my valuation might even be higher. Who knows it might be lower I might I might put this At the watch list here at 90. So then I get notified when apple is at 90 So this is why I like this software. I can do an analysis on the company and just like that Apple is in it's going to notify me when the price hits 115 That I must have already had an analysis on apple. Yeah when apple hits 115 That is when I want to buy apple or look into apple more Now, I hope you guys like the video a little bit longer than my usual video But I think the example is a really good example and worth the time watching Thanks, and I'll see you on the next video