Adobe Systems Incorporated (ADBE)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $39.78 | $39.14 | $38.52 | |
| Terminal Growth% | 0 | $40.06 | $39.41 | $38.78 |
| +1% | $40.34 | $39.68 | $39.04 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $21.34 (overvalued by 39.06%) - 9 hours ago
- jprendergast created a new valuation of $23.03 (overvalued by 37.91%) - 2 months ago
- SethWellbourne created a new valuation of $22.28 (undervalued by 7.01%) - 11 months ago
- JBatter created a new valuation of $21.93 (undervalued by 17.4%) - 1 year ago
- GordonGekko created a new valuation of $23.22 (undervalued by 24.3%) - 1 year ago
- TheCrunchBlog created a new valuation of $39.41 (overvalued by 12.71%) - 1 year ago
- KiwiEMH created a new valuation of $46.15 (undervalued by 0.57%) - 1 year ago
- GordonGekko created a new valuation of $35.10 (overvalued by 10.02%) - 1 year ago
- ThePeoplesAnalysts created a new valuation of $51.65 (undervalued by 25.94%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 16,582 |
| Net Debt (Long-term borrowings less cash): | -1,993 |
| Equity Value: | 23,950 |
| Number of Shares Outstanding: | 530,000,000 |
| Calculated value per share: | $39.41 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is supplemented by a Valuecruncher Blog post:
http://blog.valuecruncher.com/2008/08/valuing-adobe/
Based on historic growth rates and analysts estimates we have forecast Adobe’s revenues to grow to $4.6 billion in 2010 representing an annualised growth rate of 13.4% over the next three years. We have projected slight expansion in EBITDA margins from 40% in 2008 to 42% in 2010. We have used a terminal growth rate of 5% and a WACC (discount rate) of 11.25% (based on Aswath Damodaran’s estimate for the computer software/services sector).