DCF Studio

    ORCL · NYQ · Technology

    Oracle Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 32.25

    Market price

    USD 147.61

    Implied upside

    -78.2%

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

    AdjustedCapital expenditure runs at 37.5% of revenue against depreciation of 12.1%. 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.

    Value Per Share

    Perpetuity growth
    USD 32.25-78.2%
    Exit multiple
    USD 141.06-4.4%
    Market price
    USD 147.61

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m116m233mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 74.4bnUSD 82.2bnUSD 90.8bnUSD 100.3bnUSD 110.9bn+10.5%
    EBITUSD 22.8bnUSD 25.2bnUSD 27.9bnUSD 30.8bnUSD 34.0bn+10.5%
    NOPATUSD 20.2bnUSD 22.3bnUSD 24.7bnUSD 27.2bnUSD 30.1bn+10.5%
    Add depreciation & amortisationUSD 9.0bnUSD 9.9bnUSD 11.0bnUSD 12.1bnUSD 13.4bn+10.5%
    Less capital expenditureUSD -27.9bnUSD -30.8bnUSD -34.1bnUSD -37.6bnUSD -41.6bn+10.5%
    Less increase in working capitalUSD -1.1bnUSD -1.3bnUSD -1.4bnUSD -1.5bnUSD -1.7bn+10.5%
    Free cashflow to firmUSD 156.3mUSD 172.7mUSD 190.8mUSD 210.8mUSD 232.8m+10.5%
    Discount factor0.94950.85600.77170.69570.6272-
    Present valueUSD 148.4mUSD 147.8mUSD 147.2mUSD 146.6mUSD 146.0m-0.4%
    Present Value Of The ForecastUSD 736.1m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.490Reported 1.732, pulled toward 1.0 (Blume)
    Cost of equity13.20%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 446.3bn74.1% of capital
    Total debtUSD 156.2bn25.9% of capital, book value as a proxy
    Tax rate11.5%Effective, capped at statutory
    WACC10.92%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 32.25

    100% of EV

    Forecast FCFF, final year
    USD 232.8m
    Capex at depreciation, working capital in reinvestment
    USD 34.8bn
    Less reinvestment at g/ROIC (18.2% of NOPAT)
    USD -6.3bn
    Capitalised
    USD 28.5bn
    ROIC (reported)
    13.7%
    Terminal value, undiscounted
    USD 346.8bn
    Terminal value, discounted
    USD 217.5bn
    Enterprise value
    USD 218.3bn
    Less net debt
    USD 124.3bn
    Equity value
    USD 94.0bn

    Exit at 18.0x EBITDA

    Value per shareUSD 141.06

    100% of EV

    Terminal value, undiscounted
    USD 852.3bn
    Terminal value, discounted
    USD 534.6bn
    Enterprise value
    USD 535.3bn
    Less net debt
    USD 124.3bn
    Equity value
    USD 411.0bn

    Spread between methods: 126%.

    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%
    8.92%56.7660.0863.8768.2473.37
    9.92%41.4643.5345.8448.4451.40
    10.92%29.5630.8532.2533.8035.52
    11.92%20.0820.8521.6822.5723.54
    12.92%12.3612.8013.2513.7314.22

    Outlined: this model. Green text: above today's price of 147.61. 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 year10.5%33.9%+23.5pp
    EBIT margin30.7%67.1%+36.4pp
    Discount rate10.9%6.5%-4.4pp
    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.