DCF Studio

    PYPL · NMS · Financial Services

    PayPal Holdings, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 66.25

    Market price

    USD 52.41

    Implied upside

    +26.4%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Value Per Share

    Perpetuity growth
    USD 66.25+26.4%
    Exit multiple
    USD 56.85+8.5%
    Market price
    USD 52.41

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 35.3bnUSD 37.6bnUSD 40.0bnUSD 42.6bnUSD 45.3bn+6.4%
    EBITUSD 6.1bnUSD 6.5bnUSD 6.9bnUSD 7.3bnUSD 7.8bn+6.4%
    NOPATUSD 4.8bnUSD 5.1bnUSD 5.4bnUSD 5.8bnUSD 6.1bn+6.4%
    Add depreciation & amortisationUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bn+6.4%
    Less capital expenditureUSD -827.4mUSD -880.6mUSD -937.2mUSD -997.4mUSD -1.1bn+6.4%
    Less increase in working capitalUSD -1.2bnUSD -1.3bnUSD -1.4bnUSD -1.5bnUSD -1.6bn+6.4%
    Free cashflow to firmUSD 4.0bnUSD 4.3bnUSD 4.5bnUSD 4.8bnUSD 5.1bn+6.4%
    Discount factor0.95270.86480.78500.71260.6468-
    Present valueUSD 3.8bnUSD 3.7bnUSD 3.6bnUSD 3.4bnUSD 3.3bn-3.4%
    Present Value Of The ForecastUSD 17.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.192Reported 1.286, pulled toward 1.0 (Blume)
    Cost of equity11.55%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 44.8bn81.8% of capital
    Total debtUSD 10.0bn18.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.17%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 66.25

    72% of EV

    Forecast FCFF, final year
    USD 5.1bn
    Capex at depreciation, working capital in reinvestment
    USD 6.5bn
    Less reinvestment at g/ROIC (18.0% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 5.3bn
    ROIC (reported)
    13.9%
    Terminal value, undiscounted
    USD 70.9bn
    Terminal value, discounted
    USD 45.9bn
    Enterprise value
    USD 63.7bn
    Less net debt
    USD -435.0m
    Equity value
    USD 64.1bn

    Exit at 6.0x EBITDA

    Value per shareUSD 56.85

    67% of EV

    Terminal value, undiscounted
    USD 56.9bn
    Terminal value, discounted
    USD 36.8bn
    Enterprise value
    USD 54.6bn
    Less net debt
    USD -435.0m
    Equity value
    USD 55.0bn

    Spread between methods: 15%.

    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%
    8.17%83.4786.1889.3493.0797.58
    9.17%72.4774.1576.0678.2580.80
    10.17%64.0365.0866.2567.5769.05
    11.17%57.3458.0058.7259.5060.37
    12.17%51.9252.3252.7453.2053.68

    Outlined: this model. Green text: above today's price of 52.41. 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 year6.4%-2.0%-8.4pp
    EBIT margin17.2%13.6%-3.5pp
    Discount rate10.2%12.2%+2.1pp
    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.