DCF Studio

    DDOG · NMS · Technology

    Datadog, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 8.05

    Market price

    USD 229.92

    Implied upside

    -96.5%

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

    Wrong toolThis model values the shares at 3.5% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 3.6% of revenue against depreciation of 2.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 6972.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 8.05-96.5%
    Exit multiple
    USD 11.27-95.1%
    Market price
    USD 229.92

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -114682087-573410430FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.4bnUSD 5.5bnUSD 7.0bnUSD 8.9bnUSD 11.3bn+26.9%
    EBITUSD -47.3mUSD -60.0mUSD -76.2mUSD -96.8mUSD -122.9m-26.9%
    NOPATUSD -40.1mUSD -50.9mUSD -64.7mUSD -82.1mUSD -104.2m-26.9%
    Add depreciation & amortisationUSD 85.2mUSD 108.1mUSD 137.3mUSD 174.2mUSD 221.2m+26.9%
    Less capital expenditureUSD -155.7mUSD -197.7mUSD -250.9mUSD -318.6mUSD -404.4m+26.9%
    Less increase in working capitalUSD 66.5mUSD 84.4mUSD 107.2mUSD 136.1mUSD 172.7m-26.9%
    Free cashflow to firmUSD -44.2mUSD -56.1mUSD -71.2mUSD -90.3mUSD -114.7m-26.9%
    Discount factor0.94420.84170.75040.66890.5963-
    Present valueUSD -41.7mUSD -47.2mUSD -53.4mUSD -60.4mUSD -68.4m-13.2%
    Present Value Of The ForecastUSD -271.1m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.327Reported 1.488, pulled toward 1.0 (Blume)
    Cost of equity12.30%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 82.6bn98.5% of capital
    Total debtUSD 1.3bn1.5% of capital, book value as a proxy
    Tax rate15.2%Effective, capped at statutory
    WACC12.17%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 8.05

    0% of EV

    Terminal value, undiscounted
    USD 0.00
    Terminal value, discounted
    USD 0.00
    Enterprise value
    USD -271.1m
    Less net debt
    USD -3.2bn
    Equity value
    USD 2.9bn

    Exit at 20.0x EBITDA

    Value per shareUSD 11.27

    130% of EV

    Terminal value, undiscounted
    USD 2.0bn
    Terminal value, discounted
    USD 1.2bn
    Enterprise value
    USD 901.8m
    Less net debt
    USD -3.2bn
    Equity value
    USD 4.1bn

    Spread between methods: 33%.

    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%
    10.17%8.018.018.018.018.01
    11.17%8.038.038.038.038.03
    12.17%8.058.058.058.058.05
    13.17%8.068.068.068.068.06
    14.17%8.088.088.088.088.08

    Outlined: this model. Green text: above today's price of 229.92. Shading: distance from this model's own value.

    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.