Adjusting the book value growth intrinsic calculator for share buyback

I have noticed that the valuation get very low when I use the b.v intrinsic calc for stocks that has been cannibals. How can I or we best adjust for this problem?


  • @Ecofreedom

    You need to add back treasury stock to the book value to account for share buybacks.


  • So I need to add back the treasury for both the year number 1 and year number 10 to get the correct growth rate I assume?

    Y1: total euity:1000 mill. Treasury:200 mill Y10. Total eqyity: 3000 mill. Trasury: 800mill
  • @Ecofreedom : Can you provide an example of what you're talking about? I was under the impression if you're using book value per share then buybacks shouldn't matter. Assume you're talking about the BV IV Calc presented in the free buffer course.
  • Mmckenzie.
    The book value get reduced when the company buy back shares. The amount they bought back goes into something called the treasury stock. So the total equity will seem to be reduced. If you add back the treasury stock to the total equity you get the "real" equity/book value. This however only apply when you use the book value growth I.V calculator. It does not apply to the DCF calc, because the basis is Free cash flow and the growth of these free cash flows.
  • I guess I need to add back treasury both for year 1 of the calculation and year 10 of the calculations? Or the book value growth will be not be correct. It will be too high.
  • Is the treasury stock the difference between shares outstanding from year to year? I'm not sure where I would even find this data. I guess likewise would you take away shares if more shares are issued?
  • Would I calculate the adjusted book value by adding treasury stock and share holder equity for the same period from the balance sheet?

    I wonder if share are adjusted on the balance sheet after buyback and the treasure stock and share holder equity are reported in the same period well.
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