Equity Valuation Projections is a Python script that provides a template for projecting the future share price of a company based on historical revenue, earnings growth, dilution, and industry-average valuations. The algorithm calculates projected revenue, earnings per share (EPS), net income, enterprise value, and future share price, offering insights into potential investment opportunities.
This repository contains an algorithm for projecting future share prices based on historical revenue and earnings per share (EPS) data. The algorithm calculates the compound annual growth rate (CAGR) of revenue and uses a flat rate forward projection based on the average of the flat rate improvement in historical EPS.
Investors often seek to understand the potential future value of a company's shares based on its historical financial performance and industry trends. EquityValuationProjections is designed to assist in this analysis by providing a simplified model for projecting a company's future share price.
The algorithm takes into account the following inputs:
- Historical revenue
- Historical earnings per share (EPS)
- Shares outstanding
- Industry-average price-to-earnings (P/E) ratio
- Dilution rate
- Number of years into the future for the projection
Based on these inputs, the algorithm calculates the following projections:
- Projected revenue
- Projected EPS
- Projected net income
- Projected enterprise value
- Projected share price
The algorithm is designed to handle cases where a company has negative EPS and is gradually improving its earnings over time. By calculating the average rate of improvement in earnings based on historical data, the algorithm can project the path to profitability and future positive EPS for companies that are currently experiencing negative EPS. This makes the algorithm versatile and capable of handling a wide range of scenarios, including companies that are transitioning from losses to profits.
To use EquityValuationProjections, modify the input values in the script to match the specific company you want to analyze. The input values include historical revenue, historical EPS, shares outstanding, industry-average P/E ratio, dilution rate, and the number of years into the future for the projection.
The script will then calculate and output the projected share price for the specified number of years into the future.
# Example usage
historical_revenue = [565.53, 977.30, 1520, 1980] # in millions
historical_eps = [-4.30, -1.00, -0.40] # GAAP EPS
shares_outstanding = 941.68 # in millions
industry_pe_ratio = 20
dilution_rate = 0.04
years = 5
projected_price = project_future_share_price(historical_revenue, historical_eps, shares_outstanding, industry_pe_ratio, dilution_rate, years)
print(f"Projected Share Price in {years} Years: ${projected_price:.2f}")