Metrics Used to Determine Value Defining Intrinsic Value

Estimating Sustainable Free Cash Flow

Once we understand the business and where we think it’s going, we’ll estimate the sustainable free cash flow the company can generate – net income, plus depreciation and amortization, minus maintenance capital spending. Depending on the growth potential, defensibility and profitability of the business, we’ll put a 10 14x multiple on that free cash flow to arrive at a target price. At a minimum, we want to expect to make at least 50% over the next two years.