r/UndervaluedStonks

Did a full valuation on GOOGL using a reverse DCF to back out what the market is expecting at $347/share.

The implied FCF growth rate: 21.5% per year for 10 years. By year 10 they'd need to generate $451 billion in free cash flow annually. That's 7x their current TTM FCF of $64B.

We also ran a forward DCF under three scenarios. Bear case ($87) assumes growth fades early and margins compress. Base case ($121) uses a reasonable growth path tapering toward 4%. Bull case ($154) is nearly everything going right. The stock at $347 sits above all three.

On multiples: 26.5x trailing earnings vs. a 5-year historical median of 23.8x. Not extreme on its own - but the DCF already tells you why that matters.

Alphabet is one of the best businesses ever built. That's not the question. The question is whether the price already assumes a nearly flawless decade - and the numbers suggest it does.

Video with the full walkthrough; https://youtu.be/veRXcg6v_2w

Apple's price requires 14.1% FCF growth every year for 10 years. Its recent history delivered −3.9%.

I ran a reverse DCF on Apple to figure out what the current price actually assumes — not what analysts forecast, but what math says the stock needs to be worth what you're paying today.

At ~$334, the implied free cash flow growth rate is 14.1% per year for 10 years. That takes FCF from ~$129B today to roughly $484B by year 10 — about 3.75x the current level.

The problem: Apple's actual FCF CAGR over the last 3 years has been −3.9%. Revenue grew ~1.8%/yr. EPS grew ~6.9% — but that's largely buybacks, not business growth.

Running a traditional DCF against three scenarios:

Bear (growth fades to ~5%, margins under pressure): ~$120

Base (modest recovery, ~10% start fading to 4%): ~$143

Bull (everything goes right, ~14% sustained): ~$162

The current price sits above our bull case.

But here's what I keep coming back to:

Apple's multiple (26x trailing) isn't insane in isolation. The problem is it only makes sense if you believe the FCF trajectory reverses sharply and sustains for a decade — right as services growth is slowing, India ramp is uncertain, and AI hardware cycles are expensive.

The broader question I can't shake: we're in an environment where almost every large-cap looks stretched on fundamentals. At some point the argument stops being "this company is fairly valued" and becomes "everything is priced for a world with lower rates and higher growth than we have." When the whole market prices in perfection, individual stock analysis almost becomes beside the point — you're really making a macro call.

So I'm curious: how do you think about single-stock DCF work in a market where the index itself looks expensive? Do you just accept the market as the baseline, or do you build in a market-level discount somewhere?

(Made a video walking through the full Apple model — bear/base/bull scenarios, stress tests, the works — if anyone wants to see the mechanics: https://youtu.be/lQV-wZ3nPdE