DCF Studio

    VRSN · NMS · Technology

    VeriSign, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 153.68

    Market price

    USD 303.12

    Implied upside

    -49.3%

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

    Current EV/EBITDA of 24.8x 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 153.68-49.3%
    Exit multiple
    USD 247.44-18.4%
    Market price
    USD 303.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 2.0bnUSD 2.1bn+5.2%
    EBITUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.4bn+5.2%
    NOPATUSD 924.8mUSD 972.4mUSD 1.0bnUSD 1.1bnUSD 1.1bn+5.2%
    Add depreciation & amortisationUSD 45.7mUSD 48.1mUSD 50.5mUSD 53.1mUSD 55.9m+5.2%
    Less capital expenditureUSD -35.6mUSD -37.4mUSD -39.3mUSD -41.4mUSD -43.5m+5.2%
    Less increase in working capitalUSD 48.3mUSD 50.8mUSD 53.4mUSD 56.2mUSD 59.0m-5.2%
    Free cashflow to firmUSD 983.2mUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+5.2%
    Discount factor0.95720.87690.80340.73600.6743-
    Present valueUSD 941.1mUSD 906.6mUSD 873.4mUSD 841.4mUSD 810.5m-3.7%
    Present Value Of The ForecastUSD 4.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.798Reported 0.699, pulled toward 1.0 (Blume)
    Cost of equity9.39%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 27.4bn93.8% of capital
    Total debtUSD 1.8bn6.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.15%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 153.68

    72% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -47.1m
    Capitalised
    USD 1.1bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 16.7bn
    Terminal value, discounted
    USD 11.3bn
    Enterprise value
    USD 15.6bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 14.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 247.44

    82% of EV

    Terminal value, undiscounted
    USD 29.7bn
    Terminal value, discounted
    USD 20.1bn
    Enterprise value
    USD 24.4bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 23.2bn

    Spread between methods: 47%.

    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%
    7.15%190.48204.87222.35244.01271.59
    8.15%160.75170.49181.95195.62212.21
    9.15%138.77145.71153.68162.94173.82
    10.15%121.86126.99132.78139.37146.94
    11.15%108.45112.35116.69121.56127.06

    Outlined: this model. Green text: above today's price of 303.12. 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 year5.2%20.5%+15.3pp
    Discount rate9.2%5.9%-3.2pp
    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.