A lot of companies trade at paper discounts to NPV with terrible FCF. I am talking about companies that are generating FCF yields over 40%.
Let's use the previous example and say the market is willing to pay a 15% dividend yield and all FCF goes towards dividends.
Scenario A - No buyback would be FCF of $1.70 to $2.20 per share and share price of $11.30 to $14.70 per share at a 15% yield. This would occur in Year 1.
Scenario B - A$2 billion buyback would be FCF of $2.30 to $2.70 per share and share price of $15.33 to $18.00 per share at a 15% yield. This would occur in Year 2.
Scenario C - A$4 billion buyback would be FCF of $3.90 to $4.50 per share and share price of $26.00 to $30.00 per share at a 15% yield. This would occur in Year 2.
