Financial Analyst | Aug - Dec 2022Discounted Cash Flow Analysis of Protolabs Inc.
The goal of this analysis is to present investment recommendation to investors based on a discounted cash flow analysis of Protolabs Inc.
My Role:
Led the development of a comprehensive valuation report for Protolabs, Inc., from data gathering to final recommendations.
Conducted in-depth financial analysis, including reorganizing income statements and balance sheets within Excel to assess operational performance and investment potential.
Built a detailed discounted cash flow (DCF) model manually within Excel, calculating free cash flows, weighted average cost of capital (WACC), and terminal value from scratch.
Performed sensitivity analysis to evaluate growth assumptions and valuation outcomes.
Synthesized quantitative data and qualitative industry insights to deliver a grounded, strategic investment recommendation.
Process:
To build this valuation model, I gathered and analyzed extensive historical financial data of Protolabs, including income statements, balance sheets, and cash flow statements from 2012 to 2022. I reorganized this data to calculate key metrics such as NOPAT, free cash flows, and return on invested capital.
Using Excel, I built a detailed discounted cash flow (DCF) model, incorporating assumptions on revenue growth, capital expenditures, and industry outlooks. I calculated the Weighted Average Cost of Capital (WACC) based on current market conditions, and projected future cash flows over five years, including a perpetuity for the steady-state value. This approach enabled me to derive an intrinsic share value and make investment recommendations based on market comparison.
Challenges:
Modeling Assumptions Under Uncertainty: Creating assumptions for growth, industry outlooks, and valuation metrics based on information that was found during market analysis. As the assumptions made will never be identical to the real-world, there is a degree of uncertainty in the result.
Data Gathering: Collecting 10 years worth of financial statements and transforming the data into the model, requiring accuracy and consistency for the analysis
Results:
I made the recommendation to sell the stock as the analysis estimated the enterprise value should be $15.46 which is 35.50% lower than its current valuation.
I presented my findings to faculty with the support of my comprehensive analysis, showcasing my ability to apply financial analysis, build a valuation model, and critically assess potential investments.
Final Report
