DCF Studio

    ADBE · NMS · Technology

    Adobe Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 247.83

    Market price

    USD 248.92

    Implied upside

    -0.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 1.49% of revenue against depreciation of 4.20%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 4.20% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 247.83-0.4%
    Exit multiple
    USD 313.86+26.1%
    Market price
    USD 248.92

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn6bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 26.3bnUSD 29.0bnUSD 32.1bnUSD 35.5bnUSD 39.2bn+10.5%
    EBITUSD 9.3bnUSD 10.3bnUSD 11.4bnUSD 12.5bnUSD 13.9bn+10.5%
    NOPATUSD 7.4bnUSD 8.2bnUSD 9.1bnUSD 10.0bnUSD 11.1bn+10.5%
    Add depreciation & amortisationUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.5bnUSD 1.6bn+10.5%
    Less capital expenditureUSD -1.1bnUSD -1.2bnUSD -1.3bnUSD -1.5bnUSD -1.6bn+10.5%
    Less increase in working capitalUSD 171.8mUSD 189.9mUSD 209.9mUSD 232.0mUSD 256.4m-10.5%
    Free cashflow to firmUSD 7.6bnUSD 8.4bnUSD 9.3bnUSD 10.3bnUSD 11.4bn+10.5%
    Discount factor0.94690.84900.76130.68260.6120-
    Present valueUSD 7.2bnUSD 7.1bnUSD 7.1bnUSD 7.0bnUSD 6.9bn-0.9%
    Present Value Of The ForecastUSD 35.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.279Reported 1.417, pulled toward 1.0 (Blume)
    Cost of equity12.03%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 98.9bn93.7% of capital
    Total debtUSD 6.6bn6.3% of capital, book value as a proxy
    Tax rate20.0%Effective, capped at statutory
    WACC11.53%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 247.83

    67% of EV

    Forecast FCFF, final year
    USD 11.4bn
    Capex at depreciation, working capital in reinvestment
    USD 11.1bn
    Less reinvestment at g/ROIC (8.6% of NOPAT)
    USD -952.9m
    Capitalised
    USD 10.1bn
    ROIC (reported)
    29.1%
    Terminal value, undiscounted
    USD 115.2bn
    Terminal value, discounted
    USD 70.5bn
    Enterprise value
    USD 105.9bn
    Less net debt
    USD 53.0m
    Equity value
    USD 105.8bn

    Exit at 10.4x EBITDA

    Value per shareUSD 313.86

    74% of EV

    Terminal value, undiscounted
    USD 161.3bn
    Terminal value, discounted
    USD 98.7bn
    Enterprise value
    USD 134.1bn
    Less net debt
    USD 53.0m
    Equity value
    USD 134.0bn

    Spread between methods: 24%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.53%293.50304.32316.63330.78347.23
    10.53%261.25269.13277.95287.90299.23
    11.53%235.45241.33247.83255.06263.16
    12.53%214.32218.80223.71229.09235.05
    13.53%196.72200.19203.95208.05212.53

    Outlined: this model. Green text: above today's price of 248.92. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year10.5%10.6%+0.1pp
    EBIT margin35.4%35.5%+0.2pp
    Discount rate11.5%11.5%-0.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.