DCF Studio

    DELL · NYQ · Technology

    Dell Technologies Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 79.48

    Market price

    USD 568.06

    Implied upside

    -86.0%

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

    Current EV/EBITDA of 33.2x 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 79.48-86.0%
    Exit multiple
    USD 251.34-55.8%
    Market price
    USD 568.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn8bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 117.6bnUSD 121.7bnUSD 126.0bnUSD 130.5bnUSD 135.1bn+3.5%
    EBITUSD 7.9bnUSD 8.1bnUSD 8.4bnUSD 8.7bnUSD 9.0bn+3.5%
    NOPATUSD 6.5bnUSD 6.7bnUSD 6.9bnUSD 7.2bnUSD 7.4bn+3.5%
    Add depreciation & amortisationUSD 3.7bnUSD 3.9bnUSD 4.0bnUSD 4.2bnUSD 4.3bn+3.5%
    Less capital expenditureUSD -3.3bnUSD -3.4bnUSD -3.5bnUSD -3.6bnUSD -3.8bn+3.5%
    Less increase in working capitalUSD -175.0mUSD -181.2mUSD -187.6mUSD -194.2mUSD -201.1m+3.5%
    Free cashflow to firmUSD 6.8bnUSD 7.0bnUSD 7.2bnUSD 7.5bnUSD 7.8bn+3.5%
    Discount factor0.94740.85040.76330.68510.6150-
    Present valueUSD 6.4bnUSD 5.9bnUSD 5.5bnUSD 5.1bnUSD 4.8bn-7.1%
    Present Value Of The ForecastUSD 27.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.274Reported 1.409, pulled toward 1.0 (Blume)
    Cost of equity12.01%Risk-free + beta x equity risk premium
    Cost of debt5.56%Interest expense / average total debt
    Market capitalisationUSD 361.2bn92.0% of capital
    Total debtUSD 31.5bn8.0% of capital, book value as a proxy
    Tax rate17.9%Effective, capped at statutory
    WACC11.41%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 79.48

    63% of EV

    Forecast FCFF, final year
    USD 7.8bn
    Capex at depreciation, working capital in reinvestment
    USD 7.4bn
    Less reinvestment at g/ROIC (11.3% of NOPAT)
    USD -839.7m
    Capitalised
    USD 6.6bn
    ROIC (reported)
    22.1%
    Terminal value, undiscounted
    USD 75.7bn
    Terminal value, discounted
    USD 46.6bn
    Enterprise value
    USD 74.3bn
    Less net debt
    USD 20.0bn
    Equity value
    USD 54.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 251.34

    86% of EV

    Terminal value, undiscounted
    USD 266.8bn
    Terminal value, discounted
    USD 164.1bn
    Enterprise value
    USD 191.9bn
    Less net debt
    USD 20.0bn
    Equity value
    USD 171.9bn

    Spread between methods: 104%.

    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%
    9.41%99.77103.81108.42113.72119.88
    10.41%86.0688.9392.1395.7599.87
    11.41%75.1177.1879.4882.0384.88
    12.41%66.1467.6869.3571.1973.22
    13.41%58.6859.8361.0762.4263.89

    Outlined: this model. Green text: above today's price of 568.06. 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 year3.5%53.4%+49.9pp
    EBIT margin6.7%37.3%+30.6pp
    Discount rate11.4%4.0%-7.4pp
    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.