DCF Studio

    NTAP · NMS · Technology

    NetApp, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 72.17

    Market price

    USD 197.79

    Implied upside

    -63.5%

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

    Current EV/EBITDA of 20.1x 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 72.17-63.5%
    Exit multiple
    USD 149.29-24.5%
    Market price
    USD 197.79

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 7.1bnUSD 7.3bnUSD 7.5bnUSD 7.8bnUSD 8.0bn+2.9%
    EBITUSD 1.5bnUSD 1.5bnUSD 1.6bnUSD 1.6bnUSD 1.7bn+2.9%
    NOPATUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.3bn+2.9%
    Add depreciation & amortisationUSD 259.2mUSD 266.6mUSD 274.2mUSD 282.1mUSD 290.2m+2.9%
    Less capital expenditureUSD -207.4mUSD -213.3mUSD -219.4mUSD -225.7mUSD -232.2m+2.9%
    Less increase in working capitalUSD -12.9mUSD -13.3mUSD -13.7mUSD -14.1mUSD -14.5m+2.9%
    Free cashflow to firmUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+2.9%
    Discount factor0.94680.84870.76080.68200.6114-
    Present valueUSD 1.2bnUSD 1.1bnUSD 989.6mUSD 912.5mUSD 841.4m-7.8%
    Present Value Of The ForecastUSD 5.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.289Reported 1.432, pulled toward 1.0 (Blume)
    Cost of equity12.09%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 38.8bn93.4% of capital
    Total debtUSD 2.7bn6.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.55%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 72.17

    64% of EV

    Forecast FCFF, final year
    USD 1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (9.1% of NOPAT)
    USD -126.2m
    Capitalised
    USD 1.3bn
    ROIC (reported)
    27.3%
    Terminal value, undiscounted
    USD 14.2bn
    Terminal value, discounted
    USD 8.7bn
    Enterprise value
    USD 13.7bn
    Less net debt
    USD -851.0m
    Equity value
    USD 14.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 149.29

    83% of EV

    Terminal value, undiscounted
    USD 39.5bn
    Terminal value, discounted
    USD 24.2bn
    Enterprise value
    USD 29.2bn
    Less net debt
    USD -851.0m
    Equity value
    USD 30.0bn

    Spread between methods: 70%.

    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%
    9.55%84.3187.0690.1993.7897.95
    10.55%75.8477.8380.0782.5885.44
    11.55%69.0570.5372.1773.9976.03
    12.55%63.4964.6165.8467.1968.68
    13.55%58.8459.7160.6561.6762.78

    Outlined: this model. Green text: above today's price of 197.79. 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 year2.9%31.1%+28.3pp
    EBIT margin21.2%61.6%+40.5pp
    Discount rate11.6%5.5%-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.