facebook fb undervalued 10.4% buying index™ 9 value rating

Valuentum Retail Equity Research Ratings as of 23-Mar-2022 Data as of 22-Mar-2022

Buying Index™ 8 Value RatingEconomic CastleVery Attractive

Investment ConsiderationsDCF ValuationRelative Valuation

Stock Chart (weekly) ValueCreation™ValueRisk™ValueTrend™Cash Flow GenerationFinancial LeverageGrowthTechnical EvaluationRelative StrengthMoney Flow Index (MFI)Upside/Downside Volume (U/D)Near-term Technical Resistance, 10-wk MADCF = Discounted Cash Flow; MFI, U/D = Please see glossary. MA = Moving Average

Business Quality ValueCreation™

ValueRisk™ Very Poor Poor Good ExcellentCompany Vitals Investment HighlightsMarket Cap (USD) $625,685Avg Weekly Vol (30 wks) 129,63430-week Range (USD) 185.82 - 383.79Valuentum Sector Information Technology5-week Return 4.3%13-week Return -36.0%30-week Return -42.4%Dividend Yield % 0.0% Firms that generate economic profits with little operating variability score near the top right of the matrix.

Dividends per Share 0.00 Relative Valuation Forward P/E PEG Price / FV

Forward Dividend Payout Ratio 0.0% Alphabet 24.8 2.2 83.2%Est. Normal Diluted EPS 16.23 Amazon.com NMF 2.8 100.9%P/E on Est. Normal Diluted EPS 13.3 Apple 27.1 3.2 99.3%Est. Normal EBITDA 66,878 Microsoft 34.8 2.8 94.4%Forward EV/EBITDA 10.0 Peer Median 27.1 2.8 96.9%EV/Est. Normal EBITDA 8.4 Meta Platforms 15.7 1.5 59.0%Forward Revenue Growth (5-yr) 17.3% Price / FV = Current Stock Price divided by Estimated Fair Value

Forward EPS Growth (5-yr) 14.3% Financial Summary ProjectedNMF = Not Meaningful; Est. = Estimated; FY = Fiscal Year

Fiscal Year End: Dec-19 Dec-20 Dec-21

Returns Summary 3-year Historical Average Revenue 70,697 85,965 117,929Return on Equity 24.4% Revenue, YoY% 26.6% 21.6% 37.2%Return on Assets 20.1% Operating Income 23,986 32,671 46,754ROIC, with goodwill 56.4% Operating Margin % 33.9% 38.0% 39.6%ROIC, without goodwill 91.9% Net Income 18,485 29,146 39,371ROIC = Return on Invested Capital; NMF = Not Meaningful Net Income Margin % 26.1% 33.9% 33.4%Leverage, Coverage, and Liquidity Diluted EPS 6.43 10.09 13.77In Millions of USD Diluted EPS, YoY % -15.1% 57.0% 36.4%Total Debt 0 Free Cash Flow (CFO-capex) 21,212 23,631 39,115Net Debt -61,954 Free Cash Flow Margin % 30.0% 27.5% 33.2%Total Debt/EBITDA 0.0 In Millions of USD (except for per share items)

Net Debt/EBITDA NMF MEGA-CEBITDA/Interest Excellent NEUTRALCurrent Ratio 5.1Quick Ratio 4.9

Meta Platforms FB UNDERVALUED 26.9%

Low

High

• Facebook's mission is to make the world more openand connected. People use Facebook to stay in touchwith friends/family, to learn about news, and to sharewhat matters to them. The company continues toexpand its reach with businesses such as the popularsocial media platform Instagram. The company wasfounded in 2004 and is headquartered in California.

EXCELLENTMEDIUM

WEAKOVERSOLD

$275.00 - $459.00 Estimated Fair Value Sector

AGGRESSIVE

Very High

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Fair Value Range

We think shares of the company formerly known as Facebook, Meta Platforms, are attractive. We think our forecasts are conservative, and we factor in material capital spending growth.

Investment Style Industry $367.00

ATTRACTIVE

MEGA-CAP BLEND Information Technology Technology Giants

UNDERVALUED

STRONGNEGATIVE

LOW

Structure of the Internet Software & Services IndustryThe Internet software/services industry is composed of a variety of companies with rapidly-changing business models. Most focus on improving the ways people connect with information, either via Internet search or by social media platforms, and generate revenue primarily by delivering cost-effective online advertising. Constituents earn significant returns on invested capital due to their capital-light operations, though competition remains fierce. We expect most companies in this group to look substantially different 10 years from now than they do today. Overall, we’re neutral on the structure.

NEUTRAL

Medium

• Facebook's free cash flow generation and balancesheet are amazing, but investors must be cognizant ofthe low barriers to entry in the social media space andthe fickle nature of its users. Recent social andpolitical pressures have impacted public perception,and testifying in Congress has become the norm.

• Facebook's opportunities and upside potential arevast. Data privacy and security remain paramount,however. Its operating margin guidance for the yearsahead may not be as strong as it could be due toincreased levels of spending in areas such as productdevelopment and infrastructure, safety and security,and AR/VR.

----- Actual -----

• Competition is heating up, especially with TikTok.Concerns over user growth in Europe and U.S. &Canada regions have cropped up, too, but itsadvertising business is as strong as ever. E-commerce(Shops) could offer huge upside.

The week with the highest trading volume out of the last 30 weeks was a week of heavy selling, or distribution (red bar).

NMF = Not Meaningful

BEARISH

1• Facebook is building out a “metaverse,” a virtuallandscape where users can interact, play games, andconduct a variety of other functions with each other.The firm has changed its name to Meta Platforms andwill change its ticker to MVRS effective in 2022.

221.00

Visit us at www.valuentum.com

158.00

208.00

258.00

308.00

358.00

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000

Valuentum Retail Equity Research (10=best) Data as of 22-Mar-2022


Economic Profit Analysis

ValueCreation™ EXCELLENT Return on Invested Capital (ROIC)

ROIC - WACC Spread, 3-year historical average 83.0%ROIC - WACC Spread, 5-year projected average 55.4%These spreads equal the firm's annual average ROIC (excluding goodwill) less its WACC.

ValueTrend™ NEGATIVE

Weighted Average Cost of Capital (WACC) The graph above shows the firm's ROIC (excluding goodwill) compared with historical averages and its WACC.

ROIC CalculationFiscal Year End: Dec-18 Dec-19 Dec-20

Earnings before InterestOperating Income after Depreciation 24,913 23,986 32,671- Adjusted Taxes (at 16.7% of EBIT) 4,170 4,015 5,468+ Amortization 0 0 0+ Non-cash Operating Items 4,625 5,264 5,643- Minority Interest 1 0 0Earnings before Interest 25,367 25,235 32,846

Cost of Equity Invested CapitalRisk Free Rate Assumption Inventories 0 0 0Fundamental Beta (ERP multiplier) + Receivables 7,587 9,518 11,335Estimated Equity Risk Premium + Current Deferred Income Taxes 0 0 0Cost of Equity Assumption + Other Current Assets 1,779 1,852 2,381

+ Property, Plant and Equipment, Net 24,683 35,323 45,633After-tax Cost of Debt + Goodwill, Net (Cost in Excess) 18,301 18,715 19,050Risk Free Rate Assumption + Intangibles 1,294 894 623Synthetic Credit Spread + Non Current Deferred Income Taxes 0 0 0Cost of Debt Assumption - Accounts Payable 1,361 1,363 1,331Cash Tax Rate Assumption - Other Current Liabilities 3,225 11,735 11,152After-tax Cost of Debt Assumption

Invested Capital, with goodwill 49,058 53,204 66,539Cost of Preferred Stock Invested Capital, without goodwill 30,757 34,489 47,489Preferred DividendsValue of Preferred Stock Return on Invested Capital, with goodwill 60.7% 51.6% 57.0%Cost of Preferred Assumption Return on Invested Capital, without goodwill 107.9% 82.9% 84.7%

In Millions of USD

Weighted Average Cost of Capital (WACC)ERP = Equity Risk Premium

Note: Valuentum may provide an adjusted ROIC measure to better reflect the economic substance of a company's operations, as in the case of companies with negative invested capital.


0

NA16.7%

0NA

8.9%


NA

4.3%

8.9%

$367.00 $275.00 - $459.00 MEGA-CAP BLEND

Meta Platforms receives a ValueTrend™ rating of NEGATIVE, which is based on thecompany's trailing three-year performance. The firm's ROIC (excluding goodwill) fellto 84.7% last year from its trailing 3-year average of 91.9%. We expect ROIC(excluding goodwill) to be in the ballpark of about 46% by the end of our discreteforecast period, with downside risk to about 37% over that time period.

The best measure of a firm's ability to create value for shareholders is expressed bycomparing its return on invested capital (ROIC) with its weighted average cost ofcapital (WACC). The gap or difference between ROIC and WACC is called the firm'seconomic profit spread. Meta Platforms's 3-year historical return on invested capital(without goodwill) is 91.9%, which is above the estimate of its cost of capital of 8.9%.As such, we assign the firm a ValueCreation™ rating of EXCELLENT. In the chart tothe right, we show the probable path of ROIC in the years ahead based on the estimatedvolatility of key drivers behind the measure. The solid grey line reflects the most likelyoutcome, in our opinion, and represents the scenario that results in our fair valueestimate.

Information Technology Technology Giants Estimated Fair Value Fair Value Range Investment Style Sector Industry

4.3%NA

---------- Actual ----------

0.76.5%

54.4%45.6%

107.9%

82.9% 84.7%

36.9%

WACC, 8.9%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

100.0%

0.0% Equity

Debt

Preferred

Capital Structure



Growth Analysis

Revenue Growth AGGRESSIVE Projected Revenue (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

Revenue3-year Historical

CAGR5-year Projected

CAGRMeta Platforms USD 85,965 28.4% 17.3%

Alphabet USD 182,527 18.1% 19.5%

Amazon.com USD 386,064 29.5% 16.7%

Apple USD 365,817 11.3% 6.6%

Microsoft USD 168,088 15.1% 11.5%

Peer Median 16.6% 14.1%

Industry Median 7.7% 11.6%

In the chart above, we show our baseline forecast for revenue as well as potential upside and downside cases.

EBITDA Growth Projected EBITDA (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year

EBITDA3-year Historical

CAGR5-year Projected

CAGRMeta Platforms USD 39,533 19.4% 15.4%

Alphabet USD 54,921 15.3% 21.9%

Amazon.com USD 48,075 44.9% 26.3%

Apple USD 120,233 13.7% 7.3%

Microsoft USD 81,602 21.7% 13.7%



In the chart above, we show our baseline forecast for EBITDA as well as potential upside and downside cases.

Net Income Growth Projected Net Income (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year Net Income

3-year Historical CAGR

5-year Projected CAGR

Meta Platforms USD 29,146 22.3% 13.6%

Alphabet USD 40,269 47.1% 20.4%

Amazon.com USD 21,331 91.6% 31.4%

Apple USD 94,680 16.7% 7.2%

Microsoft USD 61,271 54.6% 14.0%



In the chart above, we show our baseline forecast for net income as well as potential upside and downside cases.


Meta Platforms's revenue expansion has been greater than the median of both its peergroup and industry group during the past three years. We expect the firm's revenueexpansion to outpace the median of its peer group and industry group during the nextfive years. Our growth assessment of each firm is based on the firm's 5-year forwardrevenue CAGR. Meta Platforms's future pace of revenue growth is AGGRESSIVE, inour opinion.

Meta Platforms's EBITDA expansion has been greater than that of both its peer groupand industry group during the past three years. We expect the firm's EBITDA to trail itspeer group but outpace that of its industry group during the next fiveyears.Amazon.com sports the highest expected EBITDA growth rate among peers.

Meta Platforms's net income expansion has trailed that of its peer group but has beengreater than that of its industry group during the past three years. We expect the firm'space of net income growth to fall below that of both its peer group and industry groupduring the next five years. Amazon.com sports the highest expected net income growthrate among peers.

$367.00


$275.00 - $459.00 MEGA-CAP BLEND Information Technology Technology Giants Estimated Fair Value Fair Value Range Investment Style Sector Industry

55,83870,697

85,965

244,488

190,548

136,608

0

50,000

100,000

150,000

200,000

250,000

300,000

29,228 29,727

39,533

98,225

80,949

63,673

0

20,000

40,000

60,000

80,000

100,000

120,000

22,11118,485

29,146

68,775

55,178

41,582

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000



Cash Flow and Financial Leverage AnalysisCash Flow Generation STRONG Financial Leverage LOW

The bars above show the firms operating cash flow, capital expenditures, and free cash flow, respectively. The bars above show the firm's annual debt-to-EBITDA. The red line shows the firm's normalized measure.

Cash Flow from Operations Projected Operating Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year CFO


5-year Projected CAGR


Alphabet USD 65,124 20.6% 18.1%

Amazon.com USD 66,064 53.0% 19.5%

Apple USD 104,038 10.3% 9.9%

Microsoft USD 76,740 20.5% 14.9%



In the chart above, we show our baseline forecast for CFO as well as potential upside and downside cases.

Free Cash Flow (CFO-capital expenditures) Projected Free Cash Flow (in millions of USD) Source: Company Filings, Valuentum Projections

Last Fiscal Year FCF


5-year Projected CAGR Source: Company Filings, Valuentum Projections


Alphabet USD 42,843 21.5% 19.0%

Amazon.com USD 25,924 58.8% 27.8%

Apple USD 92,953 13.2% 10.2%

Microsoft USD 56,078 20.2% 17.1%



In the chart above, we show our baseline forecast for free cash flow as well as potential upside and downside cases.


Firms that generate a free cash flow margin (free cash flow divided by total revenue)above 5% are usually considered cash cows. Meta Platforms's free cash flow marginhas averaged about 28.3% during the past 3 years. As such, we think the firm's cashflow generation is relatively STRONG. The free cash flow measure shown above isderived by taking cash flow from operations less capital expenditures and differs fromenterprise free cash flow (FCFF), which we use in deriving our fair value estimate forthe company. For more information on the differences between these two measures,please visit our website at Valuentum.com. At Meta Platforms, cash flow fromoperations increased about 32% from levels registered two years ago, while capitalexpenditures expanded about 9% over the same time period.

MEGA-CAP BLEND Information Technology Estimated Fair Value

$367.00

Meta Platforms's cash flow from operations expansion has trailed that of its peer groupbut has been greater than that of its industry group during the past three years. Weexpect the firm's cash flow from operations to trail its peer group but outpace that of itsindustry group during the next five years. Amazon.com sports the highest expected cash flow from operations growth rate among peers.

Meta Platforms's free cash flow expansion has trailed that of its peer group but has beengreater than that of its industry group during the past three years. We expect the firm'space of free cash flow growth to fall below that of both its peer group and industrygroup during the next five years. Amazon.com sports the highest expected free cashflow growth rate among peers.

Fair Value RangeTechnology Giants $275.00 - $459.00

Firms that exhibit high leverage tend to be more risky than firms with relatively lowdebt loads, all else equal. We measure financial leverage by taking a firm's currenttotal debt load and dividing it by the firm's trailing average 3-year annual EBITDA.Firms that are over 3 for this metric, we rate as having high leverage. Companies thathave less than 1.5 turns of leverage (or a measure below 1.5), we rate as having lowleverage. Meta Platforms's normalized debt-to-EBITDA measure of about 0 puts it inthe LOW camp.


Sector IndustryInvestment Style

29,274

36,314 38,747

13,915 15,102 15,11615,35921,212 23,631

Dec-18 Dec-19 Dec-20

Cash from Operations Capital Expenditures Free Cash Flow

Meta Platforms -normalized

leverage, 0.00

0

0.5

1

1.5

2

2.5

3

3.5

12/31/2018 12/31/2019 12/31/2020

Meta Platforms- annual leverage Meta Platforms - normalized leverageMedium Threshold HighThreshold

29,27436,314 38,747

93,365

76,904

60,442

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

15,359

21,21223,631

46,498

38,878

31,258

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000



Valuation Analysis

Valuation Assumptions Valuation BreakdownIn Millions of USD (except for per share items)

Revenue CAGR %Avg. EBIT Margin %Avg. Cash Tax Rate %Earnings Before Interest CAGR %Earnings Per Share CAGR %Free Cash Flow to the Firm CAGR %Earnings before interest = Net operating profits less adjusted taxes

Phase II --> III FCFF CAGR % 8.8% (II) 3% (III)Cost of Equity %After-tax Cost of Debt %Discount Rate (WACC) %Synthetic credit spread = 0.46%

Phase I Present ValuePhase II Present ValuePhase III Present ValueTotal Firm Value

Net Balance Sheet Impact

Total Equity ValueDiluted Shares OutstandingFair Value per Share

DCF Valuation Summary Enterprise Free Cash FlowFiscal Year End: 12/31/2018 12/31/2019 12/31/2020

25,367 25,235 32,8464,315 5,741 6,862

13,915 15,102 15,116-370 -6,581 2,432

- Acquisitions 137 508 38816,000 21,947 21,772

In Millions of USD

Source: Company Filings, Valuentum Projections

Company NameValuentum Buying

Index™Forward Price-to-

Earnings

Price/Earnings-to-Growth (PEG), 5-

yearEV/Est. Normal

EBITDA

5-year Forward Earnings per Share CAGR

3-year Hist Avg ROIC, without

goodwillDividend Yield

%

Stock Price / Fair Value Estimate

Meta Platforms 8 15.7 1.5 8.4 14.3% 91.9% 0.0% 59.0%

Alphabet 7 24.8 2.2 14.2 21.0% 67.5% 0.0% 83.2%

Amazon.com 6 NMF 2.8 17.1 30.1% 25.9% 0.0% 100.9%

Apple 6 27.1 3.2 18.5 9.4% 35.2% 0.5% 99.3%

Microsoft 6 34.8 2.8 19.3 14.5% 64.9% 0.8% 94.4%

Peer Median 6.0 27.1 2.8 17.8 17.8% 50.0% 0.3% 96.9%

Industry Median 6.0 22.7 2.4 13.4 14.6% 62.8% 0.7% 98.8%

61,954

Earnings before Interest

1,060,630

We think Meta Platforms is worth $367 per share with a fair value range of $275.00 -$459.00. The margin of safety around our fair value estimate is driven by the firm'sMEDIUM ValueRisk™ rating, which is derived from an evaluation of the historicalvolatility of key valuation drivers and a future assessment of them. Our near-termoperating forecasts, including revenue and earnings, do not differ much from consensusestimates or management guidance. Our model reflects a compound annual revenuegrowth rate of 17.3% during the next five years, a pace that is lower than the firm's 3-year historical compound annual growth rate of 28.4%. Our model reflects a 5-yearprojected average operating margin of 35.8%, which is below Meta Platforms's trailing3-year average. Beyond year 5, we assume free cash flow will grow at an annual rate of8.8% for the next 15 years and 3% in perpetuity. For Meta Platforms, we use a 8.9%weighted average cost of capital to discount future free cash flows.

In Millions of USD

Fair Value Range


36.0

26.0

19.6

13.3

P/E on Est. Normal Diluted EPS

16.0


125,387435,969

View back of report for a full list of industry constituents covered by Valuentum. VBI: Valuentum's ranking for the attractiveness of this investment at the date of the report.

IndustryInvestment Style Sector

- Capital Expenditures

14.3%

---------- Actual ----------

Estimated Fair Value

Results

21.3

Long-term Projections

8.9%

23.2

8.9%

In the chart below, we show the build up to our estimate of total enterprise value forMeta Platforms and the break down to the firm's total equity value, which weestimate to be about 1060.63USD billion. The present value of the enterprise freecash flows generated during each phase of our model and the net balance sheetimpact is displayed. We divide total equity value by diluted shares outstanding toarrive at our $367 per share fair value estimate.

998,676

16.8

27.8

21.1

25.3

5-year Projections

Forward EV/EBITDA

- Change in Working Capital

Enterprise Free Cash Flow (FCFF)

Our future forecasts for key valuation drivers result in a future free enterprise cashflow stream. Above, we show how we calculate enterprise free cash flow and thehistorical performance of the metric for Meta Platforms. Over the next five years, weexpect the firm's enterprise free cash flow to expand at about a 12% compoundannual growth rate. During years 6 through 20, we expect the measure to grow at a8.8% rate. Beyond year 20 (in perpetuity), we grow the firm's free cash flow atinflation (3%).

17.3%35.8%16.7%

10.0

+ Depreciation

NA

437,321

$367.00 $275.00 - $459.00 MEGA-CAP BLEND Information Technology

24.4

Company Metrics versus Peer and Industry Medians

22.8

13.5%

Technology Giants

0.0

12.0%

$367.00

125,387

435,969

437,321

61,954

1,060,630

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Yr 1-5 Yr 6-20 Perpetuity Net Balance SheetImpact

Equity Value



Margin of Safety Analysis

Range of Potential Outcomes ValueRisk™ MEDIUM

Revenue Volatility 22.6%Gross Margin Volatility 21.2%Earnings (EBI) Volatility 15.4%Cash Flow (FCFF) Volatility 14.5%Fair Value Range 25.0%The Fair Value Range sets the premium or discount on our estimate of the firm's fair value.

Upside and Downside ProbabilitiesProbability (fair value < $0) Less than 0.1%Probability (fair value > 2x current share price) 23.56%

Future Path of Fair Value

The graph above shows the expected future fair value of the firm's shares relative to its current stock price.

MEGA-CAP BLEND Estimated Fair Value

$367.00 $275.00 - $459.00Sector


Our discounted cash flow process values each firm on the basis of the present value ofall future free cash flows. Although we estimate the firm's fair value at about $367 pershare, every company has a range of probable fair values that's created by theuncertainty of key valuation drivers (like future revenue or earnings, for example). After all, if the future were known with certainty, we wouldn't see much volatility in themarkets as stocks would trade precisely at their known fair values. Our ValueRisk™rating sets the margin of safety or the fair value range we assign to each stock. In thegraph above, we show this probable range of fair values for Meta Platforms. We thinkthe firm is attractive below $275 per share (the green line), but quite expensive above$459 per share (the red line). The prices that fall along the yellow line, which includesour fair value estimate, represent a reasonable valuation for the firm, in our opinion.

Fair Value Range Investment Style


We strive to answer a few questions that investors often ask: 1) What are the chancesof a total loss of investment in this company? and 2) What is the chance that thecompany is really worth twice what I paid for it? The probability (fair value < 0)strives to answer the first question. It indicates the chance that the firm mayencounter insolvency based on the characteristics of its cash flow stream, capitalstructure, and risk profile. The probability (fair value > 2x current share price) strivesto answer the second question. It is our best estimate of whether investors areparticipating in a half-off sale by buying the company's shares at current prices.

We estimate Meta Platforms's fair value at this point in time to be about $367 per share.As time passes, however, companies generate cash flow and pay out cash toshareholders in the form of dividends. The chart to the right compares the firm's currentshare price with the path of Meta Platforms's expected equity value per share over thenext three years, assuming our long-term projections prove accurate. The range betweenthe resulting downside fair value and upside fair value in Year 3 represents our bestestimate of the value of the firm's shares three years hence. This range of potentialoutcomes is also subject to change over time, should our views on the firm's future cashflow potential change. The expected fair value of $474 per share in Year 3 representsour existing fair value per share of $367 increased at an annual rate of the firm's cost ofequity less its dividend yield. The upside and downside ranges are derived in the sameway, but from the upper and lower bounds of our fair value estimate range.

IndustryTechnology Giants

Meta Platforms receives a ValueRisk™ rating of MEDIUM based of the historicalvolatility of key drivers of economic value creation. The fair value range sets themargin of safety around our fair value estimate of the firm's shares.

Information Technology

$275

$367

$459

-200 0 200 400 600 800

$592

$474

Current Share Price, $217

$355

$0

$100

$200

$300

$400

$500

$600

$700

Current Share Price Yr 1 Fair Value Yr 2 Fair Value Yr 3 Fair Value



Technical Analysis

Technical Evaluation NEUTRAL Money Flow Index (MFI) OVERSOLD

30-week Price and Volume Chart (weekly)Relative Price Strength WEAK

5-week Company Performance 4.3%5-week Market Benchmark Performance 2.5%5-week Relative Performance vs. Market Benchmark 1.8%13-week Company Performance -36.0%13-week Market Benchmark Performance 1.4%13-week Relative Performance vs. Market Benchmark -37.4%30-week Company Performance -42.4%30-week Market Benchmark Performance 13.0%30-week Relative Performance vs. Market Benchmark -55.4%

Upside/Downside Volume BEARISH Timeliness Matrix™ Equity Valuation

Relative Strength

Firms that are undervalued and currently showing near-term pricing strength score near the top right of the matrix.


Neutral

Estimated Fair Value Fair Value Range

Strong

Overvalued

Industry $367.00

UndervaluedFairly Valued

Investment Style

The Money Flow Index (MFI) is an oscillator that uses price and volume to measurebuying and selling pressure. Chartists often look for overbought (above 80) andoversold (below 20) levels to warn of unsustainable near-term price extremes. MetaPlatforms's MFI of 15 indicates an OVERSOLD position and a high likelihood of ashort-term pop in the stock. The firm's shares have fallen too far too fast. The MFIcan also be used to gauge the strength or weakness of a firm's price trend. In MetaPlatforms's case, we think its price has reached an unsustainable near-term priceextreme, trumping the presence of any near-term divergences between its stock priceand money flow action.

The firm's near-term moving average (5-week, grey line) and medium-term movingaverage (13-week, red line) are shown in the chart above. Typically, when a shorter-term moving average crosses a medium- or longer-term moving average from below, itrepresents a bullish signal. If the short-term moving average crosses from above, tradersoften view this as bearish. Meta Platforms's 5-week moving average is below its 13-week measure, indicating a bearish trend. However, the oversold position on the firm'sMoney Flow Index (MFI) indicates a short-term pop in the stock may be around thecorner. We're NEUTRAL on the firm's technicals for now.

1


Weak

The level and trend of the Upside/Downside (U/D) volume ratio reveals whetherinstitutional participation has been bullish or bearish as of late. Meta Platforms's U/Dvolume ratio of 0.4 is not only less than 1 but also is lower than its trailing average,indicating BEARISH institutional interest during the past several weeks.

SectorInformation Technology

In the chart above, we pinpoint the heaviest accumulation or distribution week of thefirm, determined by the week with the highest trading volume during the past 30 weeks.A heavy accumulation (buying) or distribution (selling) week often determines thefuture near-term direction of the firm's share price, as money managers continue tomove in or out of the stock in the days and weeks ahead driving the stock up or down,respectively. For Meta Platforms, the week with the highest trading volume out of thelast 30 weeks was a week of heavy selling, or distribution (red bar). Such marketactivity could indicate a reversal of an uptrend or further confirmation of a downtrend.

A firm's relative price strength can be assessed over any number of time horizons. Weshow the firm's performance over the past 5 weeks, 13 weeks, and 30 weeks below.In arriving at our relative strength rating for each company, we assess the past 13weeks, which includes the market's reaction to the firm's most recently reportedquarter, where applicable, and other more recent economic events. During the past 13weeks, Meta Platforms's shares returned -36%, while the market benchmark returned1.4%. We think Meta Platforms's 13-week relative price performance is WEAK.

Technology Giants $275.00 - $459.00 MEGA-CAP BLEND

Companies that are undervalued and showing near-term relative price strength couldrepresent timely buys, as the stock may be attractive to both value and momentuminvestors. A cross section of the firm's equity valuation and its relative share pricestrength is shown in the matrix above. We tend to prefer undervalued stocks that have strong pricing momentum, also called Valuentum stocks.

158

208

258

308

358

0200,000,000400,000,000600,000,000800,000,000

1,000,000,0001,200,000,0001,400,000,0001,600,000,0001,800,000,000

5-week Moving Average 13-week Moving

Average

Stock Price

184204224244264284304324344364

Overbought Line

Oversold Line

41

15

0102030405060708090

0.4 0.4

Average, 0.5

0.00.10.20.30.40.50.60.70.8

- 10-week Moving Average



Pro Forma Income Statement -------------------- Historical --------------------

In Millions of USD (except for per share items)Dec-18 Dec-20

Total Revenue 55,838 85,965

Cost of Goods Sold 9,355 16,692

Selling, General and Administrative Expenses 11,297 18,155

Other Operating Expenses 10,273 18,447

Operating Income 24,913 32,671

Unusual items 0 0

Operating Income, including unusual items 24,913 32,671

Interest Expense 0 0

Other Non-operating Income 448 509

Pre-tax Income 25,361 33,180

Income Taxes 3,249 4,034

Income after tax 22,112 29,146

Minority Interest and Equity Income (1) 0

Net Income, excluding extra items 22,111 29,146

Income Available to Common, excluding extra items 22,111 29,146

Diluted Earnings per Share, excluding extra items 7.57 10.09

Diluted Weighted Shares Outstanding 2,921.0 2,888.0

Source: Company Filings, Xignite, Valuentum Projections

Note: Pro forma data in discounted cash-flow valuation may reflect significant adjustments from GAAP accounting data, including cash (not effective) tax rates and other analytical adjustments on a backward-looking and forward-looking basis. No individual data, by itself, found in this report should be used to make any investment decision.


40,582

14.27

Fair Value Range Investment Style

826

70,697

24,655

23,872

22,649

23,986

18,485

Information Technology Technology Giants

23,986

117,929

0

Dec-21

0

46,754 48,209

531

0

39,371

Dec-22

6.43

39,371

2,844.82,859.1

13.77

2,876.0


40,582

Estimated Fair ValueMEGA-CAP BLEND

Sector Industry $367.00 $275.00 - $459.00

18,485

18,485

24,812

39,371

0 0 0

40,582

Dec-19

12,770

20,341

13,600

6,327

132,080

0

27,076

27,737

48,740

8,158

47,285

531

46,754

29,058

7,914

0

48,209

0

---------- Projected ----------



Pro Forma Balance Sheet -------------------- Historical --------------------


AssetsTotal Cash (including marketable securities) 41,114 61,954Inventory 0 0Accounts Receivable 0 11,335Other Current Assets 7,587 2,381Total Current Assets 48,701 75,670

Gross Fixed Assets 31,573 61,051(Accumulated Depreciation) (6,890) (15,418)Net Property, Plant, and Equipment 24,683 45,633

Goodwill, Net 18,301 19,050Intangibles, Net 1,294 623Other Long-term Assets 2,576 18,340Total Assets 95,555 159,316

LiabilitiesAccounts Payable 1,361 1,331Other Current Liabilities 5,656 13,650Current Portion of Long-term Debt 0 0Total Current Liabilities 7,017 14,981

Long-term Debt 0 0Other Long-term Liabilities 6,190 16,045Total Liabilities 13,207 31,026

Preferred Stock 0 0

Shareholders' EquityCommon Stock and Additional Paid in Capital 42,906 50,018Retained Earnings 41,981 77,345Other Equity (227) 927Total Shareholders' Equity 84,660 128,290

Total Liabilities and Shareholders' Equity 97,867 159,316


94,813 116,575

9,518 2,381 2,381

$275.00 - $459.00Industry

MEGA-CAP BLEND


$367.00Investment Style

Information Technology

0

Sector

205,598

13,958 19,305 20,966

131,524

0

Technology Giants

Dec-19

Estimated Fair Value Fair Value Range

54,855

251,244

0

0 013,690 17,412 18,598

Dec-21 Dec-22

268 1,893 2,368

0

79,619 112,112(10,663)45,986

45,851 50,018 50,01855,692 116,716 157,298

(489) 3,514 6,917101,054 170,248 214,233

0 0

0 0 017,269 16,045 16,04531,227 35,350 37,011

0

132,281 251,244

15,604 17,537

136,493112,79764,373

12,219 18,340 18,340

18,715 19,050 19,050894 623 623

0

(24,831) (35,374)35,323



---------- Projected ----------

54,787 76,738

205,598



Pro Forma Cash Flow Statement -------------------- Historical --------------------


Cash from OperationsNet Income 22,112 29,146Depreciation and Amortization 4,315 6,862Deferred Income Taxes 286 (37)Operating Gains Or Losses 22,112 5,643Changes in Working Capital (2,064) (2,867)

Cash Flow from Operations 46,761 38,747

Cash from InvestingPurchase of Property, Plant, Equipment (13,915) (15,116)Other Investing Cash Flows 2,312 (14,943)Cash Flow from Investing (11,603) (30,059)

Cash from FinancingIssuance (Retirement) of Stock (12,879) (9,836)Issuance (Retirement) of Debt 0 (580)Dividends Paid 0 0Other Financing Cash Flows (2,693) 124Cash Flow from Financing (15,572) (10,292)

Foreign Exchange (179) 279

Net Change in Cash 1,920 (1,325)


Dec-19 Dec-21 Dec-22

Meta Platforms FB UNDERVALUED 26.9% Estimated Fair Value Fair Value Range Investment Style Sector Industry

$367.00 $275.00 - $459.00 MEGA-CAP BLEND Information Technology Technology Giants

---------- Projected ----------

(4,762) 0 0

15 0 0

(6,257) (3,097)

57,683 57,354

(15,102) (18,568)

18,485 39,371 40,5825,741

32,859 21,763

4 0 0

0 00 0 0

(775)

(19,864) (18,568) (32,494)

9,413 10,543

(6,539)

(32,494)

36,314

(37) 0 05,264 8,844 6,5006,861 55 (272)


(3,097)(6,257)(22,871)

9,155




Technology GiantsTechnology Giants FAIRLY VALUED

Company Name TickerMarket Cap (USD-

mil) DCF Valuation ValueCreation™ ValueRisk™ ValueTrend™ Technicals Relative Strength

Adobe Systems ADBE 319,358 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH NEUTRAL

Advanced Micro Devices AMD 175,643 FAIRLY VALUED POOR HIGH NEGATIVE BULLISH STRONG

Alibaba BABA 460,248 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Alphabet GOOG 1,894,369 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH WEAK

Amazon.com AMZN 1,807,338 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Analog Devices ADI 69,047 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Apple AAPL 2,847,136 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH WEAK

Applied Materials AMAT 145,360 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Automatic Data Processing ADP 98,725 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Baidu BIDU 58,203 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Booking Holdings BKNG 99,179 FAIRLY VALUED EXCELLENT LOW NEGATIVE VERY BEARISH STRONG

Broadcom AVGO 237,495 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Cisco CSCO 238,190 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BULLISH WEAK

eBay EBAY 54,008 FAIRLY VALUED POOR MEDIUM NEGATIVE BULLISH NEUTRAL

F5 Networks FFIV 14,310 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Meta Platforms FB 625,685 UNDERVALUED EXCELLENT MEDIUM NEGATIVE NEUTRAL WEAK

IBM IBM 106,525 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH WEAK

Intel INTC 212,362 FAIRLY VALUED EXCELLENT LOW POSITIVE BEARISH WEAK

KLA-Tencor KLAC 65,912 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Korn/Ferry KFY 3,806 FAIRLY VALUED EXCELLENT LOW POSITIVE VERY BEARISH WEAK

Lam Research LRCX 91,887 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Manpower MAN 6,012 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BEARISH WEAK

Mastercard MA 365,528 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH NEUTRAL

Micron Technology MU 87,446 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE BULLISH STRONG

Microsoft MSFT 2,457,460 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Nvidia NVDA 738,120 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

Oracle ORCL 283,524 FAIRLY VALUED EXCELLENT LOW POSITIVE BULLISH STRONG

Paychex PAYX 44,756 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BULLISH STRONG

PayPal PYPL 148,191 UNDERVALUED EXCELLENT LOW POSITIVE NEUTRAL WEAK

QUALCOMM QCOM 191,205 FAIRLY VALUED EXCELLENT LOW NEGATIVE BULLISH STRONG

Salesforce.com CRM 188,799 UNDERVALUED EXCELLENT LOW NEGATIVE BEARISH WEAK

Taiwan Semiconductor TSM 609,951 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE VERY BULLISH STRONG

Texas Instruments TXN 176,804 FAIRLY VALUED EXCELLENT MEDIUM NEGATIVE BEARISH NEUTRAL

Twitter TWTR 27,433 FAIRLY VALUED EXCELLENT MEDIUM POSITIVE NEUTRAL WEAK

Visa V 429,548 UNDERVALUED EXCELLENT LOW POSITIVE BEARISH WEAK

Estimated Fair Value Fair Value Range Investment Style Sector Industry


$367.00 $275.00 - $459.00 MEGA-CAP BLEND Information Technology Technology Giants

Relative Valuation

UNATTRACTIVE

UNATTRACTIVE

NEUTRAL

ATTRACTIVE

UNATTRACTIVE

ATTRACTIVE

UNATTRACTIVE

ATTRACTIVE

UNATTRACTIVE

NEUTRAL

LARGE-CAP GROWTH

LARGE-CAP CORE

MEGA-CAP BLEND

LARGE-CAP VALUE

MEGA-CAP VALUE

LARGE-CAP GROWTH

The above bar chart reveals the price/fair value of the company, its peers, and the industry as a whole.

We think the Technology Giants industry is fairly valued at this time. The industry'smarket cap is trading between 80% and 120% of our estimate of its fair value based onour DCF process. Although we use a firm-specific ValueRisk™ measure to determinewhether a firm is undervalued or overvalued based on our DCF process, we consider anindustry to be undervalued if it is trading below 80% of our estimate of its fair valueand overvalued if it is trading at over 120% of our estimate of its fair value. We thinkthese fair value ranges are appropriate given the diversification benefits of holding abasket of stocks. Although there may be individual opportunities within the TechnologyGiants industry, we don't find the industry as a whole attractive based solely onvaluation.

Shaded blue denotes that the firm has earned the highest rating for that respective category.Investment Style

MEGA-CAP GROWTH

LARGE-CAP GROWTH

MEGA-CAP BLEND

MEGA-CAP BLEND

MEGA-CAP GROWTH

LARGE-CAP GROWTH

MEGA-CAP VALUE

LARGE-CAP GROWTH

LARGE-CAP CORE

LARGE-CAP BLEND

UNATTRACTIVE

MEGA-CAP CORE

The information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected]. BEARISH

MEGA-CAP VALUE

LARGE-CAP CORE

MEGA-CAP BLEND

LARGE-CAP GROWTH

MID-CAP VALUE

LARGE-CAP VALUE

ATTRACTIVE

ATTRACTIVE

ATTRACTIVE

ATTRACTIVE

ATTRACTIVE

ATTRACTIVE

NEUTRAL

ATTRACTIVE

UNATTRACTIVE

UNATTRACTIVE

NEUTRAL

UNATTRACTIVE

LARGE-CAP BLEND

LARGE-CAP BLEND

LARGE-CAP VALUE

NEUTRAL

NEUTRAL

NEUTRAL

ATTRACTIVE

ATTRACTIVE

LARGE-CAP BLEND

MEGA-CAP BLEND

NEUTRAL

ATTRACTIVE

UNATTRACTIVE

ATTRACTIVE

ATTRACTIVE

UNATTRACTIVE

ATTRACTIVE

MID-CAP VALUE

MEGA-CAP GROWTH

LARGE-CAP BLEND

MEGA-CAP BLEND

MEGA-CAP GROWTH

MEGA-CAP CORE

LARGE-CAP CORE

59.0%

96.9% 98.8%

0%

20%

40%

60%

80%

100%

120%

Meta Platforms Peer Median Technology Giants

Valuentum's Full Page Stock Report


BA

G

I

N

C

J

D

M

H

E

L

K

A DCF ValuationShows whether the firm is undervalued, fairly valued, or overvalued based on our DCF process and by how much.

B Valuentum Buying Index (VBI)Provides insight into the timeliness of an investment opportunity. We rank firms from 1 to 10 based on rigorous fiancial, valuation, and technical analysis. A 10 represents one of our top picks.

C Valuentum Value Rating (VVR) Indicates whether we think a firm is undervalued, fairly valued, or overvalued on the basis of our DCF process.

D Investment ConsiderationsEvaluates firms on 12 different measures, from the firm's growth and cash flow generation to the stock's money flow index and upside/downside volume. We reveal technical support and resistance levels.

E 30-week Price and Volume ActionDisplays the last accumulation or distribution week of the stock and historical price and volume action.

G Company VitalsShows sector,industry and other relevant company information.

H Business QualitySummary of the firm's ability to create value for shareholders compared wth the underlying risk of its operations.

I Normalized EPS and EBITDAEstimation of the firm's normalized earnings measures and the corresponding valuation mutliples.

J Investment HighlightsOur opinion of the company, including analysis of its financial and technical strengths and weaknesses.

K Relative ValuationComparison of the firm's PE, PEG, and Price/FV ratios versus peers.

L Returns Summary3-year averages of the firm's key return measures, including return on invested capital, with and without goodwill.

M Leverage, Coverage, and LiquidityA snapshot of the company's financial health.

N Financial SummaryA summary of the proforma financial statements found in the extended report.

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

UNDERVALUED

FAIRLY VALUED

OVERVALUED

• Revenue Volatility • Margin Volatility • Earnings Volatility • Cash Flow VolatilityThe information and data contained in this report is not represented or warranted to be timely, complete, accurate, or correct. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this report, you should consider whether the information is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Historical firm-specific financial data generates our ValueCreation™, ValueRisk™, and ValueTrend™ ratings. The data provides the basis for our financial forecasts. Full annual forecasts of income statement, balance sheet, and cash flow statement items. Firm-specific cost of equity, cost of debt, weighted average cost of capital, and long-term growth and profitability measures estimated.

Our analysis doesn’t stop there. We also offer a technicalevaluation of the stock as well as other momentumindicators. We not only want to reveal to readers whichfirms may be undervalued, in our view, but we also wantto provide readers with information to help them assessentry and exit points. Most research publishers focus onarriving at a target price or fair value estimate, but mayfall short of providing a technical assessment to bolsterbuy and sell disciplines. We strive to go the distance andprovide readers with answers--not half the story.

An explanation of our approach would not be complete ifwe didn’t describe our ideal stock idea. We’re lookingfor companies that are undervalued--both on a DCF basisand versus peers--have strong growth potential, have asolid track record of creating economic profits forshareholders with reasonable risk, are strong cash flowgenerators, have manageable financial leverage, and arecurrently showing bullish technical and momentumindicators. For dividend growth ideas, we look forcompanies that have both the capacity and willingness tokeep raising the dividend.

Can such stock ideas exist? Subscribe to Valuentum toreceive our best investment ideas and analysis onhundreds of stocks, dividends, ETFs and more.

The firm's stock price is compared to the suggested margin of safety. If a firm's stock price falls below the lower bound of our estimated fair value range, it receives Valuentum's highest Value Rating.The volatility of key valuation drivers are estimated and a margin of safety is determined.

@Valuentum, we strive to stand out from the crowd. Mostinvestment research publishers fall into a few camps,whether it be value, growth, income, momentum, chartistor some variant of the aforementioned. We think each inits own right holds merit, but we think the combination ofthese approaches can be even more powerful. After all,stock price movements aren’t just driven by investors ofthe value or growth variety, but by all market participants.Therefore, we look at stocks from a variety of investmentperspectives in order to better understand and identifyideas. We want to provide relevant information.

The core of our process is grounded in rigorous discountedcash flow analysis and incorporates the concept of amargin of safety. We offer a fair value estimate for eachcompany and provide a relative valuation assessment inthe context of a company’s industry and closest peers. Across section of our ValueCreation™ and ValueRisk™ratings provides a financial assessment of a company’sbusiness quality, while our ValueTrend™ rating offersinsight into the trajectory of a firm’s economic profitcreation. The Economic Castle rating measures themagnitude of future economic value generation, and theDividend Cushion ratio assesses the financial capacity of acompany to keep raising its dividend.

A complete three-stage free cash flow to the firm valuation model generates an estimate of the firm's equity value per share based on estimated future free cash flows.

About Valuentum

Financial Forecasts

Financial Statement Analysis

Discounted Cash Flow Valuation

ModelValueRisk™

Rating

Valuentum Value Rating (VVR)

VBI Score Action10 Top Pick9 We'd Consider Buying

6 to 8 Constructive (add/trim)3 to 6 Less Exciting (add/trim)1 to 2 We'd Consider Selling

@ Valuentum, we like to look at companies from anumber of different perspectives. The Valuentum BuyingIndex (VBI) combines rigorous financial and valuationanalysis with an evaluation of a stock's technicals to derivea rating between 1 and 10 for each company. The VBIplaces considerable emphasis on a company's discountedcash-flow (DCF) valuation, its relative valuation versuspeers (both forward PE and PEG ratios), and its technicalsin order to help readers assess entry and exit points on themost interesting ideas.

Let's follow the red line on the flow chart below to seehow a company can score a 10, the best mark on the index(a "Top Pick"). First, the company would need to be'undervalued' on a DCF basis and 'attractive' on a relativevalue basis. The stock would also have to be exhibiting

Methodology for Picking Stocks - Valuentum Buying Index™ (VBI)

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

'bullish' technicals. The firm would need aValueCreation™ rating of 'good' or 'excellent', exhibit'high' or 'aggressive' growth prospects, and generate atleast a 'medium' or 'neutral' assessment for cash flowgeneration, financial leverage, and relative price strength.

This is a tall order for any company. Stocks that don'tmake the cut for a 10 are ranked accordingly, with theleast attractive stocks, in our opinion, garnering a ratingof 1 ("We'd sell"). Most of our coverage universeregisters ratings between 3 and 7, but at any given timethere could be large number of companies garneringeither very high or very low scores, especially at marketlows or tops, respectively.

The Best Ideas Newsletter portfolio puts the VBI intopractice.

DCF FairlyValued

DCF Undervalued

Relative ValueUnattractive/Neutral

Relative Value Attractive

Relative ValueUnattractive/Neutral


Technicals Bearish: 1

Technicals Neutral: 2

TechnicalsBullish: 4

Technicals Bullish: 7

TechnicalsBearish: 6

Technicals >= BullishValueCreation(TM) >= GoodGrowth >= HighCash Flow Generation >= MediumFinancial Leverage <= MediumRelative Strength >= Neutral

Final Score: 10



TechnicalsBearish: 3

Relative Value Unattractive/Neutral











Initial Index Score

DCF Overvalued

The information contained in this report is not represented or warranted to be accurate, correct, complete, or timely. This report is for informational purposes only and should not be considered a solicitation to buy or sell a security. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Assumptions, opinions, and estimates are based on our judgment as of the date of the report and are subject to change without notice. Valuentum is not responsible for any errors or omissions or for results obtained from the use of this report. Redistribution is prohibited without written permission. To license Valuentum research, contact us at [email protected].

Estimated Fair Value. This measure is our opinion of the fair equity value per share ofthe company. If our forecasts prove accurate, which may not always be the case, wemay expect a firm's stock price to converge to this value within the next 3 years.

Fair Value Range. The fair value range represents an upper bound and lower bound,between which we would consider the firm to be fairly valued. The range considers ourestimate of the firm's fair value and the margin of safety suggested by the volatility ofkey valuation drivers, including revenue, gross margin, earnings before interest, andenterprise free cash flow (the determinants behind our ValueRisk™ rating).

ValueCreation™. This is a proprietary Valuentum measure. ValueCreation™indicates the firm's historical track record in creating economic value for shareholders,taking the average difference between ROIC (without goodwill) and the firm'sestimated WACC during the past three years. The firm's performance is measured alongthe scale of EXCELLENT, GOOD, POOR, and VERY POOR. Those firms withEXCELLENT ratings have a demonstrated track record of creating economic value,while those that register a VERY POOR mark have been destroying economic value.

ValueRisk™. This is a proprietary Valuentum measure. ValueRisk™ indicates thehistorical volatility of key valuation drivers, including revenue, gross margin, earningsbefore interest, and enterprise free cash flow. The standard deviation of each measure iscalculated and scaled against last year's measure to arrive at a percentage deviation foreach item. These percentage deviations are weighted equally to arrive at thecorresponding fair value range for each stock, measured in percentage terms. The firm'sperformance is measured along the scale of LOW, MEDIUM, HIGH, and VERY HIGH.The ValueRisk™ rating for each firm also determines the fundamental beta of eachfirm along the following scale: LOW (0.85), MEDIUM (1), HIGH (1.15), VERY HIGH(1.3).

ValueTrend™. This is a proprietary Valuentum measure. ValueTrend™ indicates thetrajectory of the firm's return on invested capital (ROIC). Firms that earned an ROIClast year that was greater than the 3-year average of the measure earn a POSITIVErating. Firms that earned an ROIC last year that was less than the 3-year average of themeasure earn a NEGATIVE rating.

Business Quality Matrix. We compare the firm's ValueCreation™ and ValueRisk™ratings. The box is an easy way for investors to quickly assess the business quality ofa company. Firms that generate economic profits with little operating variabilityscore near the top right of the matrix.

Return on Invested Capital. At Valuentum, we place considerable emphasis onreturn on invested capital (both with and without goodwill). The measure focuses onthe return (earnings) the company is generating on its operating assets and is superiorto return on equity and return on assets, which can be skewed by a firm's leverage orexcess cash balance, respectively.

Range of Potential Outcomes. The firm's margin of safety is shown in the graphicof a normal distribution. We consider a firm to be undervalued if its stock price fallsalong the green line and overvalued if the stock price falls along the red line. Weconsider the firm to be fairly valued if its stock price falls along the yellow line.

Money Flow Index (MFI). The MFI is a technical indicator that measures buyingand selling pressure based on both price and volume. Traders typically use thismeasure to identify potential reversals with overbought and oversold levels. We use a14-week measure to rank firms along the following scale: EXTREMELYOVERBOUGHT (>90), OVERBOUGHT (80-90), NEUTRAL (20-80), OVERSOLD(10-20), EXTREMELY OVERSOLD (0-10).

Upside/Downside Volume. Heavy volume on up days and lower volume on down days suggests that institutions are heavily participating in a stock's upward advance. We use the trailing 14-week average of upside and downside volume to calculate an informative ratio. We rank each firm's U/D volume ratio along the following scale: BULLISH, IMPROVING, DETERIORATING, and BEARISH.

Relative Value. We compare the firm's forward price-to earnings (PE) ratio and itsprice/earnings-to-growth (PEG) ratio to that of its peers. If both measures fall below thepeer median, the firm receives an ATTRACTIVE rating. If both are above the peermedian, the firm receives an UNATTRACTIVE rating. Any other combination resultsin a NEUTRAL rating.

Cash Flow Generation. Firms' cash flow generation capacity are measured along thescale of STRONG, MEDIUM, and WEAK. A firm with a 3-year historical free cashflow margin (free cash flow divided by sales) greater than 5% receives a STRONGrating, while firms earning less than 1% of sales as free cash flow receive a WEAKrating.

Financial Leverage. Based on the firm's normalized debt-to-EBITDA metric, we rank firms on the following scale: LOW, MEDIUM, and HIGH. Companies with a normalized debt-to-EBITDA ratio below 1.5 receive a LOW score, while those with a measure above 3 receive a HIGH score.

Timeliness Matrix. We compare the company's recent stock performance relative tothe market benchmark with our assessment of its valuation. Firms that areexperiencing near-term stock price outperformance and are undervalued by ourestimate may represent timely buys.

Stock Price Relative Strength. We assess the perfomance of the company's stockduring the past quarter, 13 weeks, relative to an ETF that mirrors the aggregateperformance of constituents of the stock market. Firms are measured along the scaleof STRONG, NEUTRAL, and WEAK. Companies that have outperformed themarket index by more than 2.5% during this 13-week period receive a STRONGrating, while firms that trailed the market index by more than 2.5% during this 13-week period receive a WEAK rating.

Glossary

Technical Evaluation. We evaluate a firm's near-term and medium-term movingaverages and money flow index (MFI) to assign each firm a rating along thefollowing scale: VERY BULLISH, BULLISH, NEUTRAL, BEARISH, and VERYBEARISH.

DCF Valuation. We opine on the firm's valuation based on our DCF process. Firmsthat are trading with an appropriate discount to our fair value estimate receive anUNDERVALUED rating. Firms that are trading within our fair value range receive aFAIRLY VALUED rating, while firms that are trading above the upper bound of ourfair value range receive an OVERVALUED rating.

Investment Style. Valuentum uses its own proprietary stock-classification system.Nano-cap: Less than $50 million; Micro-cap: Between $50 million and $200 million;Small-cap: Between $200 million and $2 billion; Mid-cap: Between $2 billion and$10 billion; Large-cap: Between $10 billion and $200 billion; Mega-cap: Over $200billion. Blend: Firm's that we think are undervalued and exhibit high growthprospects (growth in excess of three times the rate of assumed inflation). Value:Firm's that we believe are undervalued, but do not exhibit high growth prospects.Growth: Firms that are not undervalued, in our opinion, but exhibit high growthprospects. Core: Firms that are neither undervalued nor exhibit high growthprospects.

Company Vitals. In this section, we list key financial information and the sector andindustry that Valuentum assigns to the stock. The P/E-Growth (5-yr), or PEG ratio,divides the current share price by last year's earnings (EPS) and then divides thatquotient by our estimate of the firm's 5-year EPS growth rate. The estimatednormalized diluted EPS and estimated normalized EBITDA represent the five-yearforward average of these measures used in our discounted cash flow model. The P/Eon estimated normalized EPS divides the current share price by estimated normalizeddiluted EPS. The EV/estimated normalized EBITDA considers the current enterprisevalue of the company and divides it by estimated normalized EBITDA. EV is definedas the firm's market capitalization plus total debt, minority interest, preferred stockless cash and cash equivalents.

FB Rating History Price Fair Value VBI22-Mar-22 $216.65 $367.00 83-Feb-22 $238.86 $413.00 63-Dec-21 $306.84 $507.00 615-Nov-21 $349.67 $515.00 929-Jul-21 $358.17 $515.00 1026-Jul-21 $372.46 $515.00 102-Dec-20 $287.52 $413.00 1013-Nov-20 $276.95 $337.00 612-Jun-20 $228.58 $284.00 514-May-20 $202.27 $231.00 69-Oct-19 $179.85 $234.00 317-May-19 $185.30 $227.00 718-Feb-19 $162.29 $228.00 104-Feb-19 $167.33 $226.00 7

The High Yield Dividend Newsletter portfolio, the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Any performance, including that in the Nelson Exclusive publication, is hypothetical and does not represent actual trading. Past performance is not a guarantee of future results.

Valuentum is an investment research publishing company.

Valuentum has not owned and does not own any shares of stocks mentioned on its website or in this report. President of Investment Research Brian Nelson does not own any shares of stocks mentioned on Valuentum's website or in this report. Majority share owner of Valuentum, Elizabeth Nelson, currently has exposure to HON in her retirement account.

If an independent contributor or employee mentions a stock he or she owns, we disclose it in the article/report that mentions the security. Please view individual articles on Valuentum's website for additional disclosures. Contact us to learn more about Valuentum's editorial policies.

To send us feedback or if you have any questions, please contact us at [email protected]. We're always looking for ways to better serve your investment needs and improve our research.

Disclosures, Disclaimers & Additional Sources

Copyright (c) 2017 by Valuentum, Inc. All rights reserved.No part of this publication may be reproduced in any form or by any means.The information contained in this report is not represented or warranted to be accurate, correct,complete, or timely. This report is for informational purposes only and should not be considered asolicitation to buy or sell any security. No warranty or guarantee may be created or extended bysales or promotional materials, whether by email or in any other format. The securities or strategiesmentioned herein may not be suitable for all types of investors. The information contained in thisreport does not constitute any advice, especially on the tax consequences of making any particularinvestment decision. This material is not intended for any specific type of investor and does nottake into account an investor's particular investment objectives, financial situation or needs. Thisreport is not intended as a recommendation of the security highlighted or any particular investmentstrategy. Before acting on any information found in this report, readers should consider whethersuch an investment is suitable for their particular circumstances, perform their own due-diligence,and if necessary, seek professional advice. The sources of the data used in this report are believed by Valuentum to be reliable, but the data’saccuracy, completeness or interpretation cannot be guaranteed. Assumptions, opinions, andestimates are based on our judgment as of the date of the report and are subject to change withoutnotice. Valuentum is not responsible for any errors or omissions or for results obtained from the useof this report and accepts no liability for how readers may choose to utilize the content. In no eventshall Valuentum be liable to any party for any direct, indirect, incidental, exemplary, compensatory,punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, withoutlimitation, lost income or lost profits and opportunity costs) in connection with any use of theinformation contained in this document. Investors should consider this report as only a single factorin making their investment decision. Valuentum is not a money manager, is not a registered investment advisor, and does not offerbrokerage or investment banking services. Valuentum has not received any compensation from thecompany or companies highlighted in this report. Valuentum, its employees, independentcontractors and affiliates may have long, short or derivative positions in the securities mentionedherein. Information and data in Valuentum’s valuation models and analysis may not capture allsubjective, qualitative influences such as changes in management, business and political trends, orlegal and regulatory developments. Redistribution is prohibited without written permission. Readersshould be aware that information in this work may have changed between when this work waswritten or created and when it is read. There is risk of substantial loss associated with investing infinancial instruments. Valuentum's company-specific forecasts used in its discounted cash flow model are rules-based.These rules reflect the experience and opinions of Valuentum's analyst team. Historical data used inour valuation model is provided by Xignite and from other publicly available sources includingannual and quarterly regulatory filings. Stock price and volume data is provided by Xignite. Nowarranty is made regarding the accuracy of any data or any opinions. Valuentum's valuation modelis based on sound academic principles, and other forecasts in the model such as inflation and theequity risk premium are based on long-term averages. The Valuentum proprietary automated text-generation system creates text that will vary by company and may often change for the samecompany upon subsequent updates. Valuentum uses its own proprietary stock investment style and industry classification systems. Peercompanies are selected based on the opinions of the Valuentum analyst team. Research reports anddata are updated periodically, though Valuentum assumes no obligation to update its reports,opinions, or data following publication in any form or format. Performance assessment ofValuentum metrics, including the Valuentum Buying Index, is ongoing, and we intend to updateinvestors periodically, though Valuentum assumes no obligation to do so. Not all information isavailable on all companies. There may be a lag before reports and data are updated for stock splitsand stock dividends. Past simulated performance, whether backtested or walk-forward or other, is not a guarantee offuture results. For general information about Valuentum's products and services, please contact usat [email protected] or visit our website at www.valuentum.com.

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