Microsoft Corporation (MSFT)

Discount cash flow analysis

Sell Overvalued by 30.5%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Microsoft Corporation, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2009 2010 2011 2012 2013 2014 2015 2016
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $39.84 $39.07 $38.34
Terminal Growth% 0 $40.26 $39.47 $38.72
  +1% $40.69 $39.88 $39.11

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 $45.85 (overvalued by 19.29%) - 7 months ago
  • acrouse created a new valuation of $57.76 (undervalued by 50.22%) - over 3 years ago
  • TravisEz13 created a new valuation of $39.99 (undervalued by 17.83%) - almost 4 years ago
  • TravisEz13 created a new valuation of $35.65 (undervalued by 27.55%) - 4 years ago
  • mgood created a new valuation of $40.70 (undervalued by 33.05%) - almost 5 years ago
  • beatsj8 created a new valuation of $32.87 (undervalued by 27.35%) - over 5 years ago
  • bency123 created a new valuation of $31.14 (undervalued by 26.95%) - over 5 years ago
  • gsteens created a new valuation of $26.32 (overvalued by 8.55%) - over 6 years ago
  • PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - over 6 years ago
  • PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - over 6 years ago
  • JMILOSAK created a new valuation of $33.01 (undervalued by 14.74%) - 7 years ago
  • ankallissankari created a new valuation of $28.80 (undervalued by 1.59%) - 7 years ago
  • lausan created a new valuation of $31.53 (undervalued by 13.25%) - 7 years ago
  • clp1001 created a new valuation of $31.00 (undervalued by 0.13%) - over 7 years ago
  • jfachl01 created a new valuation of $31.42 (undervalued by 4.8%) - over 7 years ago
  • Maela created a new valuation of $30.89 (undervalued by 4.29%) - over 7 years ago
  • Maela created a new valuation of $30.89 (undervalued by 4.29%) - over 7 years ago
  • smdet created a new valuation of $39.47 (undervalued by 42.34%) - over 7 years ago
  • smdet created a new valuation of $28.84 (undervalued by 4.0%) - over 7 years ago
  • smdet created a new valuation of $39.49 (undervalued by 42.41%) - over 7 years ago
  • tweakie created a new valuation of $42.81 (undervalued by 64.91%) - over 7 years ago
  • carswelli created a new valuation of $34.93 (undervalued by 48.26%) - over 7 years ago
  • mindracer created a new valuation of $29.77 (undervalued by 26.95%) - almost 8 years ago
  • GordonGekko created a new valuation of $29.43 (undervalued by 19.98%) - almost 8 years ago
  • GordonGekko created a new valuation of $27.61 (undervalued by 13.67%) - almost 8 years ago
  • woyeyele created a new valuation of $19.98 (overvalued by 10.76%) - almost 8 years ago
  • babsle16 created a new valuation of $23.76 (undervalued by 7.32%) - almost 8 years ago
  • GordonGekko created a new valuation of $23.15 (undervalued by 22.03%) - 8 years ago
  • swampler created a new valuation of $21.71 (undervalued by 10.37%) - 8 years ago
  • SethWellbourne created a new valuation of $21.68 (undervalued by 24.03%) - 8 years ago
  • savov created a new valuation of $22.46 (undervalued by 22.53%) - 8 years ago
  • savov created a new valuation of $22.46 (undervalued by 22.53%) - 8 years ago
  • savov created a new valuation of $23.09 (undervalued by 25.97%) - 8 years ago
  • rileyj98 created a new valuation of $25.50 (undervalued by 49.47%) - 8 years ago
  • afi created a new valuation of $25.48 (undervalued by 53.03%) - 8 years ago
  • balli created a new valuation of $25.47 (undervalued by 68.12%) - 8 years ago
  • thecatpreacher created a new valuation of $25.47 (undervalued by 68.12%) - 8 years ago
  • rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 8 years ago
  • rs12345 created a new valuation of $15.34 (undervalued by 0.46%) - 8 years ago
  • rs12345 created a new valuation of $12.79 (overvalued by 16.24%) - 8 years ago
  • rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 8 years ago
  • freecashsurfing created a new valuation of $27.14 (undervalued by 37.7%) - over 8 years ago
  • GordonGekko created a new valuation of $25.34 (undervalued by 32.46%) - over 8 years ago
  • GordonGekko created a new valuation of $25.79 (undervalued by 25.19%) - over 8 years ago
  • GordonGekko created a new valuation of $25.26 (undervalued by 27.13%) - over 8 years ago
  • sridhariyer27 created a new valuation of $24.16 (undervalued by 6.81%) - over 8 years ago
  • GordonGekko created a new valuation of $30.86 (undervalued by 40.53%) - over 8 years ago
  • TheCrunchBlog created a new valuation of $30.86 (undervalued by 25.6%) - over 8 years ago
  • GordonGekko created a new valuation of $32.67 (undervalued by 18.28%) - over 8 years ago
  • GordonGekko created a new valuation of $31.85 (undervalued by 14.16%) - over 8 years ago
  • andrew created a new valuation of $23.54 (overvalued by 22.62%) - 9 years ago
  • lancewiggs created a new valuation of $16.30 (overvalued by 45.36%) - 9 years ago
  • KiwiEMH created a new valuation of $30.46 (undervalued by 1.77%) - 9 years ago
  • acoy created a new valuation of $25.84 (overvalued by 15.14%) - 9 years ago
  • GordonGekko created a new valuation of $28.82 (undervalued by 6.27%) - 9 years ago
  • contrarian created a new valuation of $32.81 (undervalued by 7.75%) - 9 years ago
  • KiwiEMH created a new valuation of $34.73 (undervalued by 25.15%) - 9 years ago
  • matrixxx created a new valuation of $32.50 (undervalued by 18.14%) - 9 years ago
  • GordonGekko created a new valuation of $31.17 (undervalued by 13.3%) - 9 years ago
  • TheCrunchBlog created a new valuation of $33.01 (undervalued by 19.99%) - 9 years ago
  • KiwiEMH created a new valuation of $27.29 (undervalued by 1.0%) - 9 years ago
  • Ashkat created a new valuation of $46.69 (undervalued by 71.09%) - 9 years ago
  • KiwiEMH created a new valuation of $27.21 (overvalued by 0.29%) - 9 years ago
  • jeremy created a new valuation of $35.04 (undervalued by 15.19%) - 9 years ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 478,721
Net Debt (Long-term borrowings less cash): -25,701
Equity Value: 246,218
Number of Shares Outstanding: 8,879,000,000
Calculated value per share: $39.47

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

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.


Perpetuity

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.


CAPM model

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.