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Graham Holdings Company

Intrinsic Value Analysis (Discounted Cash Flow)Industry: Education & Training ServicesSector: Consumer Defensive

Fair Value Summary

Current Price$1,113.51
5Y Range1,676.47 – 2,663.01
5Y Selected2,169.74
(-) Safety Margin76.37%
5Y Buy Price$512.71
Upside (to Buy Price)-53.96%
10Y Range1,955.12 – 3,017.34
10Y Selected2,486.23
(-) Safety Margin76.37%
10Y Buy Price$587.50
Upside (to Buy Price)-47.24%

Company Predictability & Safety

MetricValue
Revenue R2 (5Y)0.9840
Revenue R2 (10Y)0.8413
Net Income R2 (5Y)0.2037
Net Income R2 (10Y)0.3333
EBITDA R2 (5Y)0.3869
EBITDA R2 (10Y)0.5854
FCF R2 (5Y)0.5821
FCF R2 (10Y)0.2087
Safety Score0.2363

DA 10-Year Projection

Metric2025202620272028202920302031203220332034
% Growth14.44%13.28%12.12%10.96%9.80%8.64%7.48%6.32%5.16%4.00%
Revenue5,482.916,211.256,964.267,727.748,485.249,218.529,908.2010,534.4911,078.1211,521.24
EBITDA665.26753.63845.00937.631,029.541,118.521,202.201,278.191,344.151,397.91
D&A-345.75-391.68-439.16-487.31-535.07-581.31-624.81-664.30-698.58-726.52
EBIT319.51361.95405.84450.33494.47537.20577.39613.89645.57671.39
Pro forma Taxes-72.83-82.50-92.51-102.65-112.71-122.45-131.61-139.93-147.15-153.04
NOPAT246.68279.45313.33347.68381.76414.75445.78473.96498.41518.35
Capital Expenditures-159.75-180.97-202.90-225.15-247.22-268.58-288.68-306.92-322.76-335.67
NWC Investment22.8624.0624.8725.2225.0224.2222.7820.6917.9614.64
(+) D&A345.75391.68439.16487.31535.07581.31624.81664.30698.58726.52
Free Cash Flow455.54514.22574.46635.05694.64751.70804.69852.02892.19923.84
Diluted Shares Outstanding4,362,500.004,362,500.004,362,500.004,362,500.004,362,500.004,362,500.004,362,500.004,362,500.004,362,500.004,362,500.00

Discounting Periods

MetricDec-25Dec-26Dec-27Dec-28Dec-29Dec-30Dec-31Dec-32Dec-33Dec-34
Period Start9/30/251/1/261/1/271/1/281/1/291/1/301/1/311/1/321/1/331/1/34
Period End12/31/2512/31/2612/31/2712/31/2812/31/2912/31/3012/31/3112/31/3212/31/3312/31/34
Mid-Point11/15/257/2/267/2/277/1/287/2/297/2/307/2/317/1/327/2/337/2/34
Time (t)0.100.461.462.463.464.465.466.467.468.46
Valuation Date1/16/26

Base Case Projected Flows

WACC: 9.10%Terminal Growth: 2.42%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.880.810.740.680.620.570.520.48
PV UFCF451.59494.03505.88512.60513.94509.78500.20485.46465.95442.25
Raw: 10,654.67
7,547.20
Raw: 14,170.31
6,494.43

Base Case Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value10,025.2411,376.12
(-) Net Debt1,042.971,042.97
Equity Value8,982.2710,333.14
(/) Shares Out4.364.36
Fair Value$2,058.97$2,368.63
(-) Safety Margin76.37%76.37%
Buy Price$486.54$559.71
Current Price$1,113.51$1,113.51
Upside (to Buy Price)-56.31%-49.73%

Conservative Projected Flows

WACC: 10.10%Terminal Growth: 1.92%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.870.790.720.650.590.540.490.44
PV UFCF451.18491.96499.18501.23497.97489.45475.90457.67435.29409.39
Raw: 8,657.78
5,915.07
Raw: 11,514.51
4,862.97

Conservative Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value8,356.599,572.20
(-) Net Debt1,042.971,042.97
Equity Value7,313.618,529.22
(/) Shares Out4.364.36
Fair Value$1,676.47$1,955.12
(-) Safety Margin76.37%76.37%
Buy Price$396.15$462.00
Current Price$1,113.51$1,113.51
Upside (to Buy Price)-64.42%-58.51%

Aggressive Projected Flows

WACC: 8.10%Terminal Growth: 2.92%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.890.830.760.710.650.600.560.52
PV UFCF452.01496.13512.73524.35530.58531.15526.00515.21499.09478.08
Raw: 13,808.67
10,144.57
Raw: 18,365.00
9,140.81

Aggressive Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value12,660.3614,206.12
(-) Net Debt1,042.971,042.97
Equity Value11,617.3913,163.15
(/) Shares Out4.364.36
Fair Value$2,663.01$3,017.34
(-) Safety Margin76.37%76.37%
Buy Price$629.27$713.00
Current Price$1,113.51$1,113.51
Upside (to Buy Price)-43.49%-35.97%

Reverse DCF: Market Implied Growth

Current Price$1,113.51
WACC Used9.1%
IMPLIED REVENUE GROWTH111.24%
Metric2027202820292030203120322033203420352036
Implied Revenue10,364.3021,893.8246,249.0997,697.81206,379.46435,961.49920,936.721,945,411.384,109,539.058,681,100.26
Constant Implied Growth111.24%111.24%111.24%111.24%111.24%111.24%111.24%111.24%111.24%111.24%
Implied Free Cash Flow1.042.194.629.7720.6443.6092.09194.54410.95868.11
Discount Factor0.930.810.740.680.620.570.520.480.440.40
Present Value of Implied FCF0.961.773.426.6312.8324.8448.1093.13180.32349.15

Rolling Historical DCF (Backtest)

Valuation based on actual realized growth.
YearValuation DateActual PriceRealized Growth (5Y)Calculated Fair ValueValuation Delta
20192019-12-31$638.9917.20%$252.33-60.51%
20182018-12-31$640.5814.46%$939.6446.69%
20172017-12-31$558.3511.00%$888.1959.07%
20162016-12-31$511.957.38%$753.4147.16%
20152015-12-31$484.976.33%$-152.78-131.50%
20142014-12-31$521.865.36%$447.32-14.28%
20132013-12-31$400.783.96%$273.01-31.88%
20122012-12-31$220.665.91%$660.14199.17%
20112011-12-31$227.671.77%$344.1651.17%
20102010-12-31$265.55-0.75%$742.56179.63%
20092009-12-31$265.61-6.28%$488.2783.83%
20082008-12-31$235.79-6.60%$275.1916.71%
20072007-12-31$478.19-1.12%$421.31-11.89%
20062006-12-31$450.491.32%$511.8713.63%
20052005-12-31$462.225.40%$542.1117.28%
20042004-12-31$593.946.29%$700.2017.89%
20032003-12-31$478.178.09%$417.91-12.60%
20022002-12-31$445.909.50%$753.2068.92%
20012001-12-31$320.2310.31%$212.38-33.68%
20002000-12-31$372.729.92%$382.632.66%
19991999-12-31$335.867.63%$237.83-29.19%
19981998-12-31$349.196.67%$-85.48-124.48%
19971997-12-31$293.956.67%$172.46-41.33%
19961996-12-31$202.488.57%$421.29108.06%
19951995-12-31$170.3910.09%$269.8458.36%

Monte Carlo Simulation (1,000 Iterations)

Mean Fair Value
$2,439.82
Median
$2,374.81
10th Percentile
$1,963.35
90th Percentile
$3,005.77

Fair Value Distribution

$1,505.15 - $1,665.45
5
$1,665.45 - $1,825.76
32
$1,825.76 - $1,986.06
80
$1,986.06 - $2,146.37
154
$2,146.37 - $2,306.68
147
$2,306.68 - $2,466.98
185
$2,466.98 - $2,627.29
124
$2,627.29 - $2,787.59
85
$2,787.59 - $2,947.90
72
$2,947.90 - $3,108.20
43
$3,108.20 - $3,268.51
29
$3,268.51 - $3,428.82
14
$3,428.82 - $3,589.12
11
$3,589.12 - $3,749.43
5
$3,749.43 - $3,909.73
7
$3,909.73 - $4,070.04
5
$4,070.04 - $4,230.34
1
$4,230.34 - $4,390.65
0
$4,390.65 - $4,550.96
0
$4,550.96 - $4,711.26
1