Microsoft Corporation (MSFT)
Discount cash flow analysis
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $30.73 | $30.33 | $29.94 | |
| Terminal Growth% | 0 | $30.86 | $30.46 | $30.07 |
| +1% | $31.00 | $30.59 | $30.20 |
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 $31.53 (undervalued by 21.5%) - 10 hours ago
- JMILOSAK created a new valuation of $33.01 (undervalued by 14.74%) - 5 months ago
- ankallissankari created a new valuation of $28.80 (undervalued by 1.59%) - 5 months ago
- lausan created a new valuation of $31.53 (undervalued by 13.25%) - 5 months ago
- clp1001 created a new valuation of $31.00 (undervalued by 0.13%) - 7 months ago
- jfachl01 created a new valuation of $31.42 (undervalued by 4.8%) - 7 months ago
- Maela created a new valuation of $30.89 (undervalued by 4.29%) - 8 months ago
- Maela created a new valuation of $30.89 (undervalued by 4.29%) - 8 months ago
- smdet created a new valuation of $39.47 (undervalued by 42.34%) - 8 months ago
- smdet created a new valuation of $28.84 (undervalued by 4.0%) - 8 months ago
- smdet created a new valuation of $39.49 (undervalued by 42.41%) - 8 months ago
- tweakie created a new valuation of $42.81 (undervalued by 64.91%) - 9 months ago
- carswelli created a new valuation of $34.93 (undervalued by 48.26%) - 11 months ago
- mindracer created a new valuation of $29.77 (undervalued by 26.95%) - 1 year ago
- GordonGekko created a new valuation of $29.43 (undervalued by 19.98%) - 1 year ago
- GordonGekko created a new valuation of $27.61 (undervalued by 13.67%) - 1 year ago
- woyeyele created a new valuation of $19.98 (overvalued by 10.76%) - 1 year ago
- babsle16 created a new valuation of $23.76 (undervalued by 7.32%) - 1 year ago
- GordonGekko created a new valuation of $23.15 (undervalued by 22.03%) - 1 year ago
- swampler created a new valuation of $21.71 (undervalued by 10.37%) - 1 year ago
- SethWellbourne created a new valuation of $21.68 (undervalued by 24.03%) - 1 year ago
- savov created a new valuation of $22.46 (undervalued by 22.53%) - 1 year ago
- savov created a new valuation of $22.46 (undervalued by 22.53%) - 1 year ago
- savov created a new valuation of $23.09 (undervalued by 25.97%) - 1 year ago
- rileyj98 created a new valuation of $25.50 (undervalued by 49.47%) - 1 year ago
- afi created a new valuation of $25.48 (undervalued by 53.03%) - 1 year ago
- balli created a new valuation of $25.47 (undervalued by 68.12%) - 1 year ago
- thecatpreacher created a new valuation of $25.47 (undervalued by 68.12%) - 1 year ago
- rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 1 year ago
- rs12345 created a new valuation of $12.79 (overvalued by 16.24%) - 1 year ago
- rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 1 year ago
- rs12345 created a new valuation of $15.34 (undervalued by 0.46%) - 1 year ago
- freecashsurfing created a new valuation of $27.14 (undervalued by 37.7%) - 1 year ago
- GordonGekko created a new valuation of $25.34 (undervalued by 32.46%) - 1 year ago
- GordonGekko created a new valuation of $25.79 (undervalued by 25.19%) - 1 year ago
- GordonGekko created a new valuation of $25.26 (undervalued by 27.13%) - 1 year ago
- sridhariyer27 created a new valuation of $24.16 (undervalued by 6.81%) - 1 year ago
- GordonGekko created a new valuation of $30.86 (undervalued by 40.53%) - 1 year ago
- TheCrunchBlog created a new valuation of $30.86 (undervalued by 25.6%) - 1 year ago
- GordonGekko created a new valuation of $32.67 (undervalued by 18.28%) - 1 year ago
- GordonGekko created a new valuation of $31.85 (undervalued by 14.16%) - 1 year ago
- KiwiEMH created a new valuation of $27.21 (overvalued by 0.29%) - over 2 years ago
- andrew created a new valuation of $23.54 (overvalued by 22.62%) - over 2 years ago
- lancewiggs created a new valuation of $16.30 (overvalued by 45.36%) - over 2 years ago
- KiwiEMH created a new valuation of $30.46 (undervalued by 1.77%) - over 2 years ago
- acoy created a new valuation of $25.84 (overvalued by 15.14%) - over 2 years ago
- GordonGekko created a new valuation of $28.82 (undervalued by 6.27%) - over 2 years ago
- contrarian created a new valuation of $32.81 (undervalued by 7.75%) - over 2 years ago
- KiwiEMH created a new valuation of $34.73 (undervalued by 25.15%) - over 2 years ago
- matrixxx created a new valuation of $32.50 (undervalued by 18.14%) - over 2 years ago
- GordonGekko created a new valuation of $31.17 (undervalued by 13.3%) - over 2 years ago
- TheCrunchBlog created a new valuation of $33.01 (undervalued by 19.99%) - over 2 years ago
- KiwiEMH created a new valuation of $27.29 (undervalued by 1.0%) - over 2 years ago
- jeremy created a new valuation of $35.04 (undervalued by 15.19%) - over 2 years ago
- Ashkat created a new valuation of $46.69 (undervalued by 71.09%) - over 2 years ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 218,268 |
| Net Debt (Long-term borrowings less cash): | -23,411 |
| Equity Value: | 278,746 |
| Number of Shares Outstanding: | 9,313,000,000 |
| Calculated value per share: | $30.46 |
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.
Microsoft has growth still to experience in the core business but it is reasonably predictable. That growth will slow over time. Despite a significant R&D spend - Microsoft doesn't have new hi-growth businesses that have the potential to significantly impact the share price. Microsoft is still a very valuable entity - but it isn't the growth story it had the potential to be.
A discount rate of 11.5% and terminal growth of 4%. EBITDA margins top out in the low to mid-40% range. Terminal CAPEX tops out at $2.5 billion - but that continues to be extensions to the core business not new innovation.