Discounted cash flow

In this episode of the Planet Microcap podcast, I spoke with Jeremy Boyer, co-founder and lead research analyst at Aurelian Research for a conversation on what it looks like to build an independent research firm in your early 20s and how staying outside traditional institutional constraints can be a genuine edge.

We break down his process for identifying ideas before the broader market catches on, from tracking global elections as a timing signal to uncovering shipping cycles that large funds won't touch, and why he believes a simple, well-timed price target beats a full DCF model almost every time.

We also get into why Aurelien keeps its portfolio concentrated but sector diversified, what he learned from his early calls in oil tankers and Canadian consumer brands, and the internship pitch that didn't land but set everything else in motion.

We discuss a number of ideas today in our conversation.

We would choose ourselves with our feeling, with what we're seeing in growth on the time or anything, and in historicals, we would pick maybe 15 times price to earnings.

And then you would have a price target, and that's all we forecast where it's going and if it makes sense to go at this, to get in at that time.

But in a sell side, you would still see a DCF, which personally at Orion, we never rely on.

And usually you would also see at a buy side, most buy side would say, okay, we read sell side, but we don't look at their price target because it's not even a year.

As we've already disclosed, Everpeer has been in our portfolio.

It has been a very volatile stock in our portfolio, but let's take a look at where it is, where it sits today, and run a reverse DCF on this.

At the time of this recording, share price is between 92 and $93 per share.

We used earnings per share and free cashflow blend.

And I think that to relate it to another thing I just was talking about with the DCFs, right.

Just to put it in a really nerdy finance terms for a minute, which is like the terminal value in a DCF, which is after you do all the modeling, that's actually, if you, if you do a DCF for a startup, even if you do a 10 year DCF, Usually, the present value of free cash flows of the first 10 years is negative, and the terminal value represents more than 100% of the value of the whole business.

So that's a mathy, nerdy way of saying... what you just said, but

yeah, nose to the grindstone.

Commencing with the long-term horizon.

We apply a standard discounted cash flow model here.

The DCF.

Yeah.

The analysts utilized a weighted average cost of capital, WACC, of 8.57%.

So applying those metrics against the $7.8 billion base free cash flow, the implied intrinsic value lands materially below the current trading price of $960.

Materially below.

The traditional DCF framework, which inherently demands a margin of safety, indicates severe overvaluation.

No,

it's not going to the DCF model.

Right.

But tracking capital flight from legislators during peak AI hype cycles is a very relevant sentiment indicator.

Let's start with the fundamental long-term intrinsic valuation, specifically a discounted cash flow model.

Okay.

Let's lay out the DCF.

Lay out the exact variables you're plugging into the DCF.

Our sources today are two meticulously detailed, freshly published Q3 fiscal 2026 financial and valuation research reports.

Yeah, we've got pages of data, DCF models, supply chain analyses.

The works.

So what's our actual mission for this deep dive?

The overall scorecard in the report gave it 10 passes, seven failures and two partials.

It is an undeniably exceptional business, but you are paying a massive premium for the privilege of owning it.

To figure out what that premium actually translates to, the reports utilize discounted cash flow or DCF models.

Right.

Fair enough.

The DCF model utilizes a weighted average cost of capital, or WACC, of exactly 6.5%.

This is derived using a 4.25% risk-free rate, an equity risk premium of 5.0%, and a highly defensive beta of 0.55%.

I have to stop you right there.

OK, assuming the 6.5 percent WACC holds and assuming a terminal growth rate of what?

A highly conservative terminal growth rate of 2.5 percent, essentially just matching long term GDP inflation, projecting unlevered free cash flows, scaling steadily up to 18.9 billion by FY 31.

The DCF model outputs an intrinsic value of one hundred and seventy one dollars and twenty seven cents per share.

One hundred and seventy one dollars.

You don't know how long that sales cycle is going to last.

We'll talk about that in just a moment with the reverse DCF.

This company does have a lot of breadth, a lot of vertical integration now, but a lot of the questions come from the pace of the revenue growth and the profitability.

Balance sheet is in good shape.

But this below average free cash flow and operating margin is something to flag because yes, Nokia does generate something like 16, maybe quickly approaching 20 billion euro in annual sales.

But if the current market cap, what are you actually getting for that? Yes, you get a lot of revenue, but not much profit right now.

So jumping to a reverse DCF, On a trailing 12-month basis, earnings per share and free cash flow per share are about the same.

So I'm going to leave the weights alone.