Net Present Value

1. Basic elements

Beta 0.56
Premium 0.1015
Risk Free 0.02

Cost of debt 5% Facebook barely uses debt

Highest Lowest Average https://www.gurufocus.com/term/deb2equity/FB/Debt-to-Equ

D/E 0.22 0.00 0.04 (over the past 7 years)
E/D 4.55 25.00

Chose senario with D/E ratio: Average

D/(D+E) 0.0384615385
E/(E+D) 0.8196721311
We do not take into account the preferred stock

Tax Rate 40%

WACC 6.414% (without using preferred stock)

2. DCF

Actual

year 2012 2013 2014 2015 2016 2017

fcf 377.00 2,860.00 3,626.00 6,076.00 11,617.00 16,205.72
growth 6.59 0.27 0.68 0.91 0.40
Discounted 15,228.97

3. Terminal value
a. Gordon

Estimation of the perpetuity growth rate 6% (educated guess)

Terminal Value 6,318,633.66

NPV 6,401,187.63

b. Thomson Reuters

Terminal Value Estimation Per Multiples

EV/EBITDA 9.5302747979 Multiples summary

EV/EBIT 13.0985230083
EV/sales
FCF

EBITDA 3,804.95 EV (ebi t)

EBIT 2,808.87

EV (ebitda) 3,626,219.41
EV (ebi tda)
EV (ebit) 3,679,199.33
FCF 6,318,633.66
0 1000000 2000000 3000000 4000000 5000000 6000000 700
 EV (ebi tda)

0 1000000 2000000 3000000 4000000 5000000 6000000 700

Adjustment
Exit Multiple 4,541,350.80

Adjusted NPV 4,623,904.76

urufocus.com/term/deb2equity/FB/Debt-to-Equity/Facebook%2BInc

preferred stock)

Forecast

2018 2019 2020 2021

17,696.64 19,767.15 22,079.90 24,663.25
0.09 0.12 0.12 0.12
15,627.71 16,404.04 17,218.93 18,074.31

summary

000 4000000 5000000 6000000 7000000

000 4000000 5000000 6000000 7000000
Estimates forecast multiples - Thomson Reuters

Multiples

YoY growth 2015 2016 2017 2018 2019 2020

-3.57% EV/EBITDA 10.8367 11.61026 11.02214 10.56852 10.24894 9.883075
-5.49% EV/EBIT 16.30705 19.10097 15.77101 14.86347 14.08626 13.58342
-7.26% PE 20.19955 20.78505 18.40203 16.87297 15.82385 15.25898
-7.26% PEG 1.334613 1.537261 1.409527 1.321887 1.274699
2.75% Dividend Y 3.114465 3.160949 3.223192 3.314604 3.403134 3.281651
47.10% FCF Yield 5.345723 3.319926 6.177332 6.67983 6.441377
-2.51% Price/Sales 2.3821 2.85727 2.754438 2.678332 2.618068 2.52461
-18.81% Price/Cash 10.46167 11.30563 15.23658 10.35401 9.776198 9.427213
-0.32% Price/Book 2.60816 2.450347 2.477146 2.472505 2.461387 2.373522
8.76% Return on 5.61 5.45 6.29667 7.18567 7.4295 7.164286
Return on 12.4 12.22 13.6345 15.334 15.43967 14.88851
ROIC 11.42 9.2 58.3 0.058575
0.910231

Metrics

2015 2016 2017 2018 2019 2020

EBITDA 3392 3166 3334.932 3478.073 3586.528 3,694.12
EBIT 2293 2142 2330.738 2473.05 2609.5 2,713.88
Pre-Tax Pro 1877 1739 1928.515 2090.751 2218.208 2,329.12
Net Incom 1672 1551 1672.257 1805.546 1887.499 1,963.00
#NAME? 2.13 2.07 2.33806 2.54994 2.719
EPS - Repo 1.6 4.13 1.76 1.99
DPS 1.34 1.36 1.38678 1.42611 1.4642
Free Cash 1801 1995 1107.25 1901 2023.333

Growth
 2018 2019 2020 2021
EBITDA 4.29% 3.12% 3.00% 3.00%
EBIT 6.11% 5.52% 4% 3.50%
Pre-Tax Pro 8.41% 6.10% 5% 4.00%
Net Incom 7.97% 4.54% 4% 3.50%
FCF Yield 9.06% 6.63%
EPS - Repo 13.07% -100.00%
 2021
EBIT and EBITDA
9.5302747979 4000

13.0985230083 3500
14.7142727527 3000
1.2291950365
2500
3.1645040309
2000
6.2114359957
2.4344876346 1500
9.0906856657 1000
2.2887933418 500
6.9085390578
0
14.3570311912 2015 2016 2017 2018 2019
0
EBITDA EBIT

Profit And Losses figures 2015 -2021

4000

3500

3000
2021
2500
3,804.95
2,808.87 2000
2,422.28 1500
2,031.70 1000

500

0
2015 2016 2017 2018 2019

EBITDA EBIT Pre-Tax Profit Net Income

EBITDA and EBIT - GROWTH EQUATION

7.00%
6.00%
f(x) = -0.0084891284 l n(x) + 0.0610589996
 EBITDA and EBIT - GROWTH EQUATION
7.00%
6.00%
f(x) = -0.0084891284 l n(x) + 0.0610589996
5.00%
4.29%
4.00% f(x) = -0.0169366953 l n(x) + 0.0429219667
3.00%
2.00%
1.00%
0.00%
2018
EBITDA Loga ri thmi c (EBITDA)
EBIT Loga ri thmi c (EBIT)
BITDA

2019 2020 2021

EBIT

ures 2015 -2021

18 2019 2020 2021

Profit Net Income

OWTH EQUATION
OWTH EQUATION

3.12%

2019
Loga ri thmi c (EBITDA)
Loga ri thmi c (EBIT)
Estimates - Thomson Reuters

Estimates summary

2015 2017 2015 2016 2017 2018 2019 2020

Revenue
Gross Income 3,364 9,586 3,325 3,441
EBITDA 3,166 3,383 3,392 3,166 3,335 3,478 3,587
EBIT 2,142 2,378 2,293 2,142 2,331 2,473 2,610
Pre-Tax Pro 1,739 1,983 1,877 1,739 1,929 2,091 2,218
Net Incom 1,584 1,717 1,672 1,551 1,672 1,806 1,887
#NAME? 2.12 2.41 2.13 2.07 2.34 2.55 2.72
EPS - Repo 4.18 1.84 1.60 4.13 1.76 1.99
DPS 1.36 1.40 1.34 1.36 1.39 1.43 1.46
Free Cash 2,961 1,372 1,801 1,995 1,107.25 1,901.00 2,023.33 2,141.85
0.72 0.06 0.06 0.06
0.91
Forecast multiples

LTM NTM 2015 2016 2017 2018 2019

0 #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NAME?
0 11.70 10.87 10.84 11.61 11.02 10.57 10.25
0 23.10 15.46 16.31 19.10 15.77 14.86 14.09
0 32.13 17.86 20.20 20.79 18.40 16.87 15.82
0 -17.85 1.49 1.33 1.54 1.41 1.32
0 3.16 3.25 3.11 3.16 3.22 3.31 3.40
0 2.30 4.27 5.35 3.32 6.18 6.68
0 2.79 2.73 2.38 2.86 2.75 2.68 2.62
0 10.44 13.17 10.46 11.31 15.24 10.35 9.78
0 2.45 2.48 2.61 2.45 2.48 2.47 2.46
0 3.69 6.59 5.61 5.45 6.30 7.19 7.43
0 7.92 14.20 12.40 12.22 13.63 15.33 15.44
ROIC 7.41 11.42 9.20 58.30
 2021

2,267.31
-
Cash flow statement

Fiscal year is January-December. All values USD Millions. 2016 2015 2014 2013 2012
Net Income before Extraordinaries 10,217 3,688 2,940 1,500 53
Net Income Growth 177.03% 25.44% 96.00% 2730.19% -

Depreciation, Depletion & Amortization 2,342 1,945 1,243 1,011 649

Depreciation and Depletion 1,591 1,215 924 866 571

Amortization of Intangible Assets 751 730 319 145 78

Deferred Taxes & Investment Tax Credit -457 -795 -210 -37 -186

Deferred Taxes -457 -795 -210 -37 -186

Other Funds 3,248 2,977 1,746 1,072 1,587

Funds from Operations 15,350 7,815 5,719 3,546 2,103

Changes in Working Capital 758 784 -262 676 -491

Receivables -1,489 -973 -610 22 -621

Accounts Payable 81 35 3 38 -1

Other Accruals 1,014 513 328 -38 160

Other Assets/Liabilities 1,152 1,209 17 654 -29

Net Operating Cash Flow 16,108 8,599 5,457 4,222 1,612

Net Operating Cash Flow Growth 87.32% 57.58% 29.25% 161.91% -
Net Operating Cash Flow / Sales 58.28% 47.96% 43.78% 53.63% 31.68%

Investing Activities

All values USD Millions. 2016 2015 2014 2013 2012

Capital Expenditures -4,491 -2,523 -1,831 -1,362 -1,235

Capital Expenditures (Fixed Assets) -4,491 -2,523 -1,831 -1,362 -1,235

Capital Expenditures Growth -78.00% -37.79% -34.43% -10.28% -

Capital Expenditures / Sales -16.25% -14.07% -14.69% -17.30% -24.27%

Net Assets from Acquisitions -123 -313 -4,975 -368 -911

Purchase/Sale of Investments -7,125 -6,700 1,243 -883 -4,876

Purchase of Investments -22,341 -15,938 -9,104 -7,434 -10,309

Sale/Maturity of Investments 15,216 9,238 10,347 6,551 5,433

Other Uses - - -350 -11 -2

Other Sources - 102 - - -

Net Investing Cash Flow -11,739 -9,434 -5,913 -2,624 -7,024

Net Investing Cash Flow Growth -24.43% -59.55% -125.34% 62.64% -

Net Investing Cash Flow / Sales -42.47% -52.62% -47.43% -33.33% -138.02%

Financing Activities

All values USD Millions. 2016 2015 2014 2013 2012

Change in Capital Stock - - 18 1,504 6,777
Sale of Common & Preferred Stock - - 18 1,504 6,777
Proceeds from Stock Options - - - 1,478 6,760
Other Proceeds from Sale of Stock - - 18 26 17

Issuance/Reduction of Debt, Net -312 -119 -243 -1,891 1,335

Change in Long-Term Debt -312 -119 -243 -1,891 1,335

Issuance of Long-Term Debt - - - - 1,701

Reduction in Long-Term Debt -312 -119 -243 -1,891 -366

Other Funds 2 1,701 1,796 -280 -1,829

Other Uses - -20 -73 -889 -2,862

Other Sources 2 1,721 1,869 609 1,033

Net Financing Cash Flow -310 1,582 1,571 -667 6,283

Net Financing Cash Flow Growth -119.60% 0.70% 335.53% -110.62% -

Net Financing Cash Flow / Sales -1.12% 8.82% 12.60% -8.47% 123.46%

Exchange Rate Effect -63 -155 -123 8 1

Net Change in Cash 3,996 592 992 939 872

Free Cash Flow 11,617 6,076 3,626 2,860 377
Free Cash Flow Growth 91.19% 67.57% 26.78% 658.62% -
Free Cash Flow Yield 3.45% - - - -
Risk Premium estimation

Market portfolio using PRAT

Formula of sustainable growth rate SGR = b * ROE

b= (net income - dividends)/(net income)

SGR = (net income-dividends)/net income P Profit margin

* (net income / sales) R Retention rate
* (sales / total assets) A Asset turnover
* (total asset / equity) T Financial leverage

Risk free rate source https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Ratios calcl

Average 2016 2015 2014

Ratios
Retention rate 0.50 0.50 0.58
Profit margin 9.38% 9.01% 9.34%
Asset turnover 0.70 0.72 0.81
Financial leverage 2.81 2.72 2.54
Averages
Retention rate 0.57
Profit margin 9.39%
Asset turnover 0.78
Financial leverage 2.59
Estimates
Market portfolio dividend growth rate 10.85% source - stockanalysis
Add: Market portfolio dividend yield 2.10% source -stockanalysis

Expected rate of return on market 12.95%

Less: Risk-free rate of return 2.80%

Market prtf premium 10.15%

dividends)/(net income)

s/Pages/TextView.aspx?data=yield

2013 2012

0.64 0.64
10.19% 9.01%
0.82 0.85
2.40 2.49
Beta Estimation

Assumptions
Rate of return on LT Treasury Composite 2.00%
Expected rate of return on market portfolio 12.95%

Extracts

Systematic risk (β) of Facebook's common stock 0.68 (stock analysis portfolio)
0.56 (yahoo finance)
0.59 (Reuters)
Average 0.61

Others

Required rate of return on Facebook's common stock 8.68%

VarianceFB 138.63
VarianceS&P 500 8.25
CovarianceFB, S&P 500 5.6
Correlation CoefficientFB, S&P 5001 0.6787878788
βFB2 0.6787878788
(stock analysis portfolio)
(yahoo finance)
Peers - key metrics

Market Cap Revenue

Facebook Inc 531.12 27.64

Sector average (Mean) 199.86 34.11

Sector median 97.80 13.49

Apple Inc 898.35 229.23B

Alphabet Inc 728.51 90.27B
Microsoft Corp 642.30 89.95B
Facebook Inc 531.10 27.64B
Visa Inc 254.20 18.36B
Intel Corp 209.43 59.39B
Oracle Corp 204.50 37.73B
Cisco Systems Inc 180.30 48.01B
Mastercard Inc 161.70 10.78B
International Business Machines Corp 140.57 79.92B
NVIDIA Corp 131.48 6.91B
Qualcomm Inc 101.50 22.29B
Texas Instruments Inc 97.8 13.37B

Market Ca
1000.00
939.85
898.35
900.00

800.00
728.51
700.00
646.06 642.30
595.16
600.00
531.12
501.6
500.00

400.00

300.00
199.86
194.12
200.00
97.80 89.46
100.00

0.00

Ma rke

Texa s Instruments Inc

 Texa s Instruments Inc
Qua l comm Inc
NVIDIA Corp
International Bus i nes s Machi nes Corp
Mastercard Inc
Ci s co Systems Inc
Oracl e Corp
Intel Corp
Vi s a Inc
Fa cebook Inc
Mi cros oft Corp
Al pha bet Inc
Appl e Inc

Sector medi an
Sector avera ge (Mean)

Fa cebook Inc

0 20 40

EBITDA
 EBITDA Operatinng profit Net Income Enterprise Value

14.70 12.43 10.22 501.6

11.38 8.80 7.34 194.12

5.74 3.87 3.60 89.46

70.74 48.30 939.85

29.82 23.72 19.48 646.06
31.41 22.20 21.20 595.16
14.77 12.40 10.22 501.67
12.72 12.14 6.70 624.72
22.55 12.78 10.32 217.61
15.73 12.71 9.34 195.78
15.07 11.97 9.61 143.62
6.29 5.70 4.00 158.57
17.32 12.30 11.80 174.35
2.14 1.93 1.67 128.5
6.51 2.47 2.47 86.17
5.74 4.8 3.6 97.99

Market Cap and Enterprise Value

939.85
898.35

728.51

646.06 642.30
624.72
595.16

531.10
501.67

254.20
209.43217.61 204.50195.78
180.30 174.35
161.70158.57
143.62 140.57

Ma rket Ca p Enterpri s e Va l ue

Other metrics
 Other metrics

0 40 60 80 100

EBITDA Operatinng profit Net Income

0 174.35
161.70158.57
143.62 140.57 131.48128.5
101.50 97.80 97.99
86.17
100 120 140
Starmine Relative Valuation Model
FB.O
11/27/2017

Model Summary Rank

North America 13
United States 14
Information Technology 32
Internet Software & Services 60

Component Details

Technology
FB.O FB.O F12M
F12M T12M Average
EV/Sales 5 9.2 12.6 3.3
EV/EBITDA 30 14.9 19.5 23.9
P/E 25 27.5 31.9 0.1
Price/Cash Flow 30 19.7 24.8 45.7
Price/Book 13 5.7 6.1 10.1
Buyback Yield 24 0.8%

Growth
5 Yr Hist
Name Growth Last FY =>
FB.O - Earning Per Share - $ 66.0% 4.23 69.1%
Software & IT Services Average 21.4% 4.4%
Software & IT Services Median 11.5% 9.5%
FB.O - Revenue - $ 49.4% 27,638.00 45.8%
Software & IT Services Average 20.2% 22.6%
Software & IT Services Median 9.2% 9.4%
 Software & IT Software & IT
Technology Services Software & IT Services Software & IT
Technology T12M Technology F12M Services T12M Services
F12M Median Average T12M Median Average F12M Median Average T12M Median
2.4 183.5 2.7 3.8 3.0 239.4 3.3
11.6 -58.4 8.2 34.2 14.5 -42.9 7.2
18.1 -12.6 0.0 2.4 20.8 -31.4 -0.4
17.8 527.9 5.6 62.8 21.4 418.0 0.0
3.7 -32.2 2.2 14.8 5.0 -51.8 2.4
18.2% 2.3% 22.0% 2.9%

NTM/LTM
This FY => Next FY YoY Growth Growth PEG NTM LTG Mean
5.90 13.9% 6.72 61.7% 17.3% 1.03 26.7%
41.9% 17.4% 90.6% 6.14 16.6%
17.3% 7.5% 16.5% 1.63 16.0%
40,284.47 33.6% 53,824.12 42.7% 34.5%
27.2% 14.6% 15.8%
11.0% 9.7% 9.6%
Facebook Inc., free cash flow to equity (FCFE) forecast
USD $ in millions, except per share data

Present
FCFE(t)
Year Value value at
or TV(t)
9.65%
0 FCFE(0) 11,305
1 FCFE(1) 12,296 11,214
2 FCFE(2) 13,330 11,088
3 FCFE(3) 14,404 10,927
4 FCFE(4) 15,515 10,734
5 FCFE(5) 16,657 10,511
5 TV(5)
Facebook's 782,570 493,810
common
stock 548,283
Facebook's common
stock (per share) $188.69
Current share price $182.78
Thomson Reuters Projections

Distinct Forecast Period

Last Year Year 1 Year 2 Year 3 Year 4 Year 5
16-Dec 17-Dec 18-Dec 19-Dec 20-Dec 21-Dec
StarMine Projections (USD/Share)
Earnings Projections
SmartEstimate 5.9 6.72 8.42 10.48 ---
Long Term Growth - Mean --- --- --- --- 26.70%
Starting Estimate 5.9 6.72 8.42 10.48 13.27
Adjustment for Optimism 0 -0.28 -1.23 -2.44 -4.3
EPS 4.23 5.9 6.44 7.19 8.04 8.98
YoY Growth 85.50% 39.50% 9.20% 11.70% 11.70% 11.70%
Source (Reuters)
 Value
EV/Sales 9.2 254,269.60
EV/EBITDA 14.9 221,563.00
P/E 27.5
Price/Cash 19.7
Price/Book 5.7

SOURCE ; REUTERS
 2016
Sales (adverti 27,638.00
Net income 10,217 3,688
Add: Income tax expense 2,301
Earnings before tax (EBT) 12,518
Add: Interest expense 10
Earnings before interest and tax (EBIT) 12,528
Add: Depreciation and amortization 2,342
Earnings before interest, tax, depreciation and amortization (EBITDA) 14870
 2015 2014 2013 2012

2,940 1,500 53
2,506 1,970 1,254 441
6,194 4,910 2,754 494
23 23 56 51
6,217 4,933 2,810 545
1,945 1,243 1,011 649
8,162 6,176 3,821 1,194
Avg. Revenue per Customer USD 15.98 33.61%
Gross Margin 88.10% 2.21%
Operating Margin 51.66% 7.83%
Net Margin 48.51% 21.78%
Asset Turnover 0.14 16.01%
ROE 7.54% 3.90%
Debt/Equity 0.00% -0.26%
YoY USD --
4Q 71.11%
4Q 4.45%
4Q 1.85%
4Q 0.19
4Q 0.99%
4Q 0.05%