Microsoft Corporation (MSFT)

Discount cash flow analysis

Sell Overvalued by 58.6%

5% margin of safety What's this?

close

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.

Spacer
Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

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% $23.74 $23.47 $23.20
Terminal Growth% 0 $23.82 $23.54 $23.27
  +1% $23.90 $23.62 $23.35

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%) - over 1 year ago
  • acrouse created a new valuation of $57.76 (undervalued by 50.22%) - over 4 years ago
  • TravisEz13 created a new valuation of $39.99 (undervalued by 17.83%) - almost 5 years ago
  • TravisEz13 created a new valuation of $35.65 (undervalued by 27.55%) - 5 years ago
  • mgood created a new valuation of $40.70 (undervalued by 33.05%) - almost 6 years ago
  • beatsj8 created a new valuation of $32.87 (undervalued by 27.35%) - over 6 years ago
  • bency123 created a new valuation of $31.14 (undervalued by 26.95%) - over 6 years ago
  • gsteens created a new valuation of $26.32 (overvalued by 8.55%) - 7 years ago
  • PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - over 7 years ago
  • PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - over 7 years ago
  • JMILOSAK created a new valuation of $33.01 (undervalued by 14.74%) - 8 years ago
  • ankallissankari created a new valuation of $28.80 (undervalued by 1.59%) - 8 years ago
  • lausan created a new valuation of $31.53 (undervalued by 13.25%) - 8 years ago
  • clp1001 created a new valuation of $31.00 (undervalued by 0.13%) - over 8 years ago
  • jfachl01 created a new valuation of $31.42 (undervalued by 4.8%) - over 8 years ago
  • Maela created a new valuation of $30.89 (undervalued by 4.29%) - over 8 years ago
  • Maela created a new valuation of $30.89 (undervalued by 4.29%) - over 8 years ago
  • smdet created a new valuation of $39.47 (undervalued by 42.34%) - over 8 years ago
  • smdet created a new valuation of $28.84 (undervalued by 4.0%) - over 8 years ago
  • smdet created a new valuation of $39.49 (undervalued by 42.41%) - over 8 years ago
  • tweakie created a new valuation of $42.81 (undervalued by 64.91%) - over 8 years ago
  • carswelli created a new valuation of $34.93 (undervalued by 48.26%) - over 8 years ago
  • mindracer created a new valuation of $29.77 (undervalued by 26.95%) - over 8 years ago
  • GordonGekko created a new valuation of $29.43 (undervalued by 19.98%) - almost 9 years ago
  • GordonGekko created a new valuation of $27.61 (undervalued by 13.67%) - almost 9 years ago
  • woyeyele created a new valuation of $19.98 (overvalued by 10.76%) - almost 9 years ago
  • babsle16 created a new valuation of $23.76 (undervalued by 7.32%) - almost 9 years ago
  • GordonGekko created a new valuation of $23.15 (undervalued by 22.03%) - 9 years ago
  • swampler created a new valuation of $21.71 (undervalued by 10.37%) - 9 years ago
  • SethWellbourne created a new valuation of $21.68 (undervalued by 24.03%) - 9 years ago
  • savov created a new valuation of $22.46 (undervalued by 22.53%) - 9 years ago
  • savov created a new valuation of $22.46 (undervalued by 22.53%) - 9 years ago
  • savov created a new valuation of $23.09 (undervalued by 25.97%) - 9 years ago
  • rileyj98 created a new valuation of $25.50 (undervalued by 49.47%) - 9 years ago
  • afi created a new valuation of $25.48 (undervalued by 53.03%) - 9 years ago
  • balli created a new valuation of $25.47 (undervalued by 68.12%) - 9 years ago
  • thecatpreacher created a new valuation of $25.47 (undervalued by 68.12%) - 9 years ago
  • rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 9 years ago
  • rs12345 created a new valuation of $15.34 (undervalued by 0.46%) - 9 years ago
  • rs12345 created a new valuation of $12.79 (overvalued by 16.24%) - 9 years ago
  • rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - 9 years ago
  • freecashsurfing created a new valuation of $27.14 (undervalued by 37.7%) - over 9 years ago
  • GordonGekko created a new valuation of $25.34 (undervalued by 32.46%) - over 9 years ago
  • GordonGekko created a new valuation of $25.79 (undervalued by 25.19%) - over 9 years ago
  • GordonGekko created a new valuation of $25.26 (undervalued by 27.13%) - over 9 years ago
  • sridhariyer27 created a new valuation of $24.16 (undervalued by 6.81%) - over 9 years ago
  • GordonGekko created a new valuation of $30.86 (undervalued by 40.53%) - over 9 years ago
  • TheCrunchBlog created a new valuation of $30.86 (undervalued by 25.6%) - over 9 years ago
  • GordonGekko created a new valuation of $32.67 (undervalued by 18.28%) - over 9 years ago
  • GordonGekko created a new valuation of $31.85 (undervalued by 14.16%) - over 9 years ago
  • andrew created a new valuation of $23.54 (overvalued by 22.62%) - 10 years ago
  • lancewiggs created a new valuation of $16.30 (overvalued by 45.36%) - 10 years ago
  • KiwiEMH created a new valuation of $30.46 (undervalued by 1.77%) - 10 years ago
  • acoy created a new valuation of $25.84 (overvalued by 15.14%) - 10 years ago
  • GordonGekko created a new valuation of $28.82 (undervalued by 6.27%) - 10 years ago
  • contrarian created a new valuation of $32.81 (undervalued by 7.75%) - 10 years ago
  • KiwiEMH created a new valuation of $34.73 (undervalued by 25.15%) - 10 years ago
  • matrixxx created a new valuation of $32.50 (undervalued by 18.14%) - 10 years ago
  • GordonGekko created a new valuation of $31.17 (undervalued by 13.3%) - 10 years ago
  • TheCrunchBlog created a new valuation of $33.01 (undervalued by 19.99%) - 10 years ago
  • KiwiEMH created a new valuation of $27.29 (undervalued by 1.0%) - 10 years ago
  • Ashkat created a new valuation of $46.69 (undervalued by 71.09%) - 10 years ago
  • KiwiEMH created a new valuation of $27.21 (overvalued by 0.29%) - 10 years ago
  • jeremy created a new valuation of $35.04 (undervalued by 15.19%) - 10 years ago

Comments

Vista Balls Up

Revenue growth slowing unless they manage to sort out the Vista debacle.

By andrew, about 10 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 505,318
Net Debt (Long-term borrowings less cash): -23,411
Equity Value: 283,118
Number of Shares Outstanding: 9,306,000,000
Calculated value per share: $23.54

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.