DCF Studio

    AKAM · NMS · Technology

    Akamai Technologies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 32.34

    Market price

    USD 104.52

    Implied upside

    -69.1%

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

    Value Per Share

    Perpetuity growth
    USD 32.34-69.1%
    Exit multiple
    USD 111.21+6.4%
    Market price
    USD 104.52

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m268m535mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.4bnUSD 4.7bnUSD 4.9bnUSD 5.2bnUSD 5.4bn+5.2%
    EBITUSD 763.4mUSD 802.9mUSD 844.5mUSD 888.2mUSD 934.2m+5.2%
    NOPATUSD 627.6mUSD 660.1mUSD 694.3mUSD 730.3mUSD 768.1m+5.2%
    Add depreciation & amortisationUSD 713.1mUSD 750.1mUSD 788.9mUSD 829.8mUSD 872.7m+5.2%
    Less capital expenditureUSD -757.6mUSD -796.8mUSD -838.1mUSD -881.5mUSD -927.2m+5.2%
    Less increase in working capitalUSD -145.9mUSD -153.4mUSD -161.4mUSD -169.7mUSD -178.5m+5.2%
    Free cashflow to firmUSD 437.3mUSD 459.9mUSD 483.8mUSD 508.8mUSD 535.2m+5.2%
    Discount factor0.96330.89380.82940.76960.7141-
    Present valueUSD 421.2mUSD 411.1mUSD 401.2mUSD 391.6mUSD 382.2m-2.4%
    Present Value Of The ForecastUSD 2.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.755Reported 0.635, pulled toward 1.0 (Blume)
    Cost of equity9.15%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 15.0bn72.6% of capital
    Total debtUSD 5.7bn27.4% of capital, book value as a proxy
    Tax rate17.8%Effective, capped at statutory
    WACC7.77%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 32.34

    78% of EV

    Forecast FCFF, final year
    USD 535.2m
    Capex at depreciation, working capital in reinvestment
    USD 768.1m
    Less reinvestment at g/ROIC (32.2% of NOPAT)
    USD -247.1m
    Capitalised
    USD 521.0m
    ROIC (WACC floor)
    7.8%
    Terminal value, undiscounted
    USD 10.1bn
    Terminal value, discounted
    USD 7.2bn
    Enterprise value
    USD 9.2bn
    Less net debt
    USD 4.5bn
    Equity value
    USD 4.8bn

    Exit at 14.6x EBITDA

    Value per shareUSD 111.21

    90% of EV

    Terminal value, undiscounted
    USD 26.4bn
    Terminal value, discounted
    USD 18.8bn
    Enterprise value
    USD 20.8bn
    Less net debt
    USD 4.5bn
    Equity value
    USD 16.3bn

    Spread between methods: 110%.

    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%
    5.77%58.5260.6163.2466.7171.58
    6.77%41.7742.0642.3442.6342.92
    7.77%31.8632.1032.3432.5832.82
    8.77%24.2424.4424.6524.8525.05
    9.77%18.2118.3818.5618.7318.91

    Outlined: this model. Green text: above today's price of 104.52. 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 year5.2%29.8%+24.6pp
    EBIT margin17.2%35.3%+18.1pp
    Discount rate7.8%4.8%-3.0pp
    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.