Core Insights - The current market perception of company earnings may be overly pessimistic compared to the actual financial situation as indicated by earnings reports [1] - Various valuation methods exist, with the Free Cash Flow to Equity (FCFE) model providing a clearer picture of shareholder value by focusing on earnings, amortization, and investments [1] Valuation Methods - The DCF method is complex and can introduce biases due to its reliance on numerous assumptions [1] - The multiples approach is simpler but assumes peer companies are fairly priced, which is often not the case [1] - Reverse valuation starts from market price and discount rate to uncover free cash flow assumptions embedded in the price, offering a more straightforward assessment of market beliefs [1] FCFE Model - The FCFE model calculates true shareholder value as Earnings + Amortization – CAPEX – average acquisition cost [1] - Working capital and debt changes are excluded from this model as they are considered noise not related to core business operations [1] - The H-model is applied for forecasts, utilizing a two-stage growth fade over ten years with terminal growth aligned to the risk-free rate [1] Cash Flow Discounting - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP [1] - This approach results in a clear and noise-free valuation of the business [1]

Core Insights - The current market perception of company earnings may be overly pessimistic compared to the actual financial situation as indicated by deeper analysis of earnings reports [1] Valuation Methods - Various methods exist for sell-side analysts to determine a company's fair value, including DCF, multiples approach, and reverse valuation, each with its own strengths and weaknesses [1] - The DCF method requires precise assumptions, which can introduce bias, while the multiples approach relies on the assumption that peer companies are fairly priced, a notion that is often not supported by historical data [1] - Reverse valuation starts from the market price and discount rate, working backward to reveal the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to determine the actual value belonging to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost [1] - The analysis disregards working capital and debt changes, focusing instead on three key figures: earnings, amortization, and investments [1] Forecasting Approach - The H-model is applied for forecasts, which involves a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the yield of 10-year government bonds [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear and noise-free valuation of the business [1]

Core Viewpoint - Oatly Group AB is perceived as being in a vulnerable position, akin to "swimming naked," as it faces scrutiny regarding its valuation and financial health [1]. Valuation Methods - Various methods exist for sell-side analysts to determine a company's fair value, including DCF, multiples approach, and reverse valuation, each with its own strengths and weaknesses [1]. - The DCF method is complex and can introduce biases, while the multiples approach relies on the assumption that peer companies are fairly priced, which is often not the case [1]. - Reverse valuation starts from the market price and discount rate, revealing the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1]. Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to assess what belongs to shareholders, calculated as Earnings + Amortization – CAPEX – average acquisition cost = FCFE [1]. - The analysis disregards working capital and debt changes, focusing instead on three key figures: earnings, amortization, and investments [1]. Forecasting Approach - The H-model is applied for forecasts, featuring a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the 10-year government bond yield [1]. - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear picture of the business's true worth [1].

Core Viewpoint - Centene Corporation (NYSE: CNC) is initiated with a Strong Buy rating, reflecting a positive outlook on the company's potential value and performance [1]. Valuation Methodology - The article discusses various methods sell-side analysts use to determine a company's fair value, highlighting the limitations of traditional approaches like DCF and multiples [1]. - A reverse valuation approach is proposed, which starts from the market price and discount rate to uncover the free cash flow assumptions embedded in the price, providing a more realistic assessment of the company's worth [1]. - The Free Cash Flow to Equity (FCFE) model is utilized to calculate what truly belongs to shareholders, focusing on earnings, amortization, and investments while ignoring working capital and debt changes [1]. Forecasting Approach - The H-model is applied for forecasts, which incorporates a 10-year two-stage growth fade, with terminal growth aligned to the risk-free rate, specifically the 10-year government bond yield [1]. - All cash flows are discounted using the cost of equity, calculated as the risk-free rate multiplied by beta plus a 5% equity risk premium (ERP), resulting in a clear picture of the business's intrinsic value [1].