DCF Studio

    WDAY · NMS · Technology

    Workday, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 24.33

    Market price

    USD 193.87

    Implied upside

    -87.5%

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

    Current EV/EBITDA of 32.9x 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 24.33-87.5%
    Exit multiple
    USD 87.84-54.7%
    Market price
    USD 193.87

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m150m299mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 11.0bnUSD 12.7bnUSD 14.7bnUSD 16.9bnUSD 19.5bn+15.4%
    EBITUSD 447.0mUSD 515.8mUSD 595.3mUSD 686.9mUSD 792.7m+15.4%
    NOPATUSD 353.1mUSD 407.5mUSD 470.3mUSD 542.7mUSD 626.2m+15.4%
    Add depreciation & amortisationUSD 474.9mUSD 548.0mUSD 632.4mUSD 729.8mUSD 842.1m+15.4%
    Less capital expenditureUSD -389.2mUSD -449.1mUSD -518.2mUSD -598.0mUSD -690.1m+15.4%
    Less increase in working capitalUSD -270.1mUSD -311.7mUSD -359.7mUSD -415.1mUSD -479.0m+15.4%
    Free cashflow to firmUSD 168.8mUSD 194.7mUSD 224.7mUSD 259.3mUSD 299.3m+15.4%
    Discount factor0.95220.86350.78300.71000.6438-
    Present valueUSD 160.7mUSD 168.2mUSD 176.0mUSD 184.1mUSD 192.7m+4.6%
    Present Value Of The ForecastUSD 881.6m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.055Reported 1.082, pulled toward 1.0 (Blume)
    Cost of equity10.80%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 46.7bn92.4% of capital
    Total debtUSD 3.8bn7.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.28%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 24.33

    82% of EV

    Forecast FCFF, final year
    USD 299.3m
    Capex at depreciation, working capital in reinvestment
    USD 626.2m
    Less reinvestment at g/ROIC (24.3% of NOPAT)
    USD -152.3m
    Capitalised
    USD 474.0m
    ROIC (WACC floor)
    10.3%
    Terminal value, undiscounted
    USD 6.2bn
    Terminal value, discounted
    USD 4.0bn
    Enterprise value
    USD 4.9bn
    Less net debt
    USD -1.6bn
    Equity value
    USD 6.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 87.84

    96% of EV

    Terminal value, undiscounted
    USD 32.7bn
    Terminal value, discounted
    USD 21.0bn
    Enterprise value
    USD 21.9bn
    Less net debt
    USD -1.6bn
    Equity value
    USD 23.6bn

    Spread between methods: 113%.

    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%
    8.28%29.5129.6129.7029.8029.90
    9.28%26.5526.6326.7126.8026.88
    10.28%24.1824.2524.3324.4024.47
    11.28%22.2522.3122.3822.4422.51
    12.28%20.6520.7120.7620.8220.88

    Outlined: this model. Green text: above today's price of 193.87. 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
    EBIT margin4.1%35.5%+31.4pp
    Discount rate10.3%2.8%-7.5pp
    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.