DCF Studio

    CRM · NYQ · Technology

    Salesforce, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 62.67

    Market price

    USD 237.92

    Implied upside

    -73.7%

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

    AdjustedReported capital expenditure averages 1.96% of revenue against depreciation and amortisation of 10.34%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 10.34% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 62.67-73.7%
    Exit multiple
    USD 196.52-17.4%
    Market price
    USD 237.92

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 45.6bnUSD 50.1bnUSD 55.0bnUSD 60.4bnUSD 66.3bn+9.8%
    EBITUSD 7.4bnUSD 8.1bnUSD 8.9bnUSD 9.8bnUSD 10.8bn+9.8%
    NOPATUSD 6.0bnUSD 6.6bnUSD 7.2bnUSD 7.9bnUSD 8.7bn+9.8%
    Add depreciation & amortisationUSD 4.7bnUSD 5.2bnUSD 5.7bnUSD 6.2bnUSD 6.9bn+9.8%
    Less capital expenditureUSD -4.7bnUSD -5.2bnUSD -5.7bnUSD -6.2bnUSD -6.9bn+9.8%
    Less increase in working capitalUSD -2.7bnUSD -2.9bnUSD -3.2bnUSD -3.5bnUSD -3.9bn+9.8%
    Free cashflow to firmUSD 3.3bnUSD 3.6bnUSD 4.0bnUSD 4.4bnUSD 4.8bn+9.8%
    Discount factor0.95000.85750.77400.69860.6305-
    Present valueUSD 3.1bnUSD 3.1bnUSD 3.1bnUSD 3.1bnUSD 3.0bn-0.9%
    Present Value Of The ForecastUSD 15.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.135Reported 1.202, pulled toward 1.0 (Blume)
    Cost of equity11.24%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 195.8bn91.9% of capital
    Total debtUSD 17.2bn8.1% of capital, book value as a proxy
    Tax rate19.2%Effective, capped at statutory
    WACC10.79%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 62.67

    77% of EV

    Forecast FCFF, final year
    USD 4.8bn
    Capex at depreciation, working capital in reinvestment
    USD 8.7bn
    Less reinvestment at g/ROIC (23.2% of NOPAT)
    USD -2.0bn
    Capitalised
    USD 6.7bn
    ROIC (WACC floor)
    10.8%
    Terminal value, undiscounted
    USD 82.5bn
    Terminal value, discounted
    USD 52.0bn
    Enterprise value
    USD 67.5bn
    Less net debt
    USD 7.6bn
    Equity value
    USD 59.9bn

    Exit at 16.2x EBITDA

    Value per shareUSD 196.52

    92% of EV

    Terminal value, undiscounted
    USD 285.5bn
    Terminal value, discounted
    USD 180.0bn
    Enterprise value
    USD 195.5bn
    Less net debt
    USD 7.6bn
    Equity value
    USD 187.9bn

    Spread between methods: 103%.

    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%
    8.79%80.8181.1681.5181.8782.22
    9.79%70.4870.7971.0971.4071.70
    10.79%62.1462.4062.6762.9363.20
    11.79%55.2555.4955.7255.9556.19
    12.79%49.4949.7049.9050.1150.32

    Outlined: this model. Green text: above today's price of 237.92. 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 year9.8%56.7%+46.9pp
    EBIT margin16.2%50.2%+34.0pp
    Discount rate10.8%4.8%-6.0pp
    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.