6 min read
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Corsair Gaming’s estimated fair value is US$17.67 based on 2 Stage Free Cash Flow to Equity
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Corsair Gaming is estimated to be 50% undervalued based on current share price of US$8.89
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Our fair value estimate is 58% higher than Corsair Gaming’s analyst price target of US$11.17
Today we’ll do a simple run through of a valuation method used to estimate the attractiveness of Corsair Gaming, Inc. (NASDAQ:CRSR) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. Before you think you won’t be able to understand it, just read on! It’s actually much less complex than you’d imagine.
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
We’re using the 2-stage growth model, which simply means we take in account two stages of company’s growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today’s value:
|
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
2032 |
2033 |
2034 |
2035 |
|
|
Levered FCF ($, Millions) |
US$85.3m |
US$109.7m |
US$113.5m |
US$117.3m |
US$121.2m |
US$125.1m |
US$129.0m |
US$133.1m |
US$137.3m |
US$141.5m |
|
Growth Rate Estimate Source |
Analyst x2 |
Analyst x2 |
Est @ 3.49% |
Est @ 3.37% |
Est @ 3.28% |
Est @ 3.22% |
Est @ 3.18% |
Est @ 3.15% |
Est @ 3.13% |
Est @ 3.11% |
|
Present Value ($, Millions) Discounted @ 8.8% |
US$78.4 |
US$92.7 |
US$88.2 |
US$83.9 |
US$79.6 |
US$75.6 |
US$71.7 |
US$68.0 |
US$64.5 |
US$61.1 |
(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$764m
