DCF Studio

    XYZ · NYQ · Technology

    Block, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 20.60

    Market price

    USD 76.28

    Implied upside

    -73.0%

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

    AdjustedReported capital expenditure averages just 0.74% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.72% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 20.60-73.0%
    Exit multiple
    USD 41.72-45.3%
    Market price
    USD 76.28

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 26.9bnUSD 30.0bnUSD 33.4bnUSD 37.2bnUSD 41.4bn+11.3%
    EBITUSD 1.4bnUSD 1.6bnUSD 1.8bnUSD 2.0bnUSD 2.2bn+11.3%
    NOPATUSD 1.1bnUSD 1.3bnUSD 1.4bnUSD 1.6bnUSD 1.7bn+11.3%
    Add depreciation & amortisationUSD 464.2mUSD 516.8mUSD 575.4mUSD 640.6mUSD 713.2m+11.3%
    Less capital expenditureUSD -464.2mUSD -516.8mUSD -575.4mUSD -640.6mUSD -713.2m+11.3%
    Less increase in working capitalUSD -428.6mUSD -477.2mUSD -531.3mUSD -591.5mUSD -658.5m+11.3%
    Free cashflow to firmUSD 697.5mUSD 776.5mUSD 864.5mUSD 962.5mUSD 1.1bn+11.3%
    Discount factor0.93500.81750.71480.62490.5464-
    Present valueUSD 652.2mUSD 634.8mUSD 617.9mUSD 601.5mUSD 585.5m-2.7%
    Present Value Of The ForecastUSD 3.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta2.020Reported 2.522, pulled toward 1.0 (Blume)
    Cost of equity16.11%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 45.8bn83.6% of capital
    Total debtUSD 9.0bn16.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC14.38%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 20.60

    69% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (17.4% of NOPAT)
    USD -300.9m
    Capitalised
    USD 1.4bn
    ROIC (WACC floor)
    14.4%
    Terminal value, undiscounted
    USD 12.3bn
    Terminal value, discounted
    USD 6.7bn
    Enterprise value
    USD 9.8bn
    Less net debt
    USD -3.0bn
    Equity value
    USD 12.8bn

    Exit at 12.5x EBITDA

    Value per shareUSD 41.72

    87% of EV

    Terminal value, undiscounted
    USD 36.4bn
    Terminal value, discounted
    USD 19.9bn
    Enterprise value
    USD 23.0bn
    Less net debt
    USD -3.0bn
    Equity value
    USD 26.0bn

    Spread between methods: 68%.

    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%
    12.38%23.4723.5423.6123.6723.74
    13.38%21.8721.9321.9822.0422.10
    14.38%20.4920.5520.6020.6520.70
    15.38%19.3119.3519.4019.4519.50
    16.38%18.2718.3218.3618.4018.44

    Outlined: this model. Green text: above today's price of 76.28. 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 year11.3%69.8%+58.4pp
    EBIT margin5.3%20.9%+15.6pp
    Discount rate14.4%4.2%-10.2pp
    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.