Stock Analysis on Net
Stock Analysis on Net

Etsy Inc. (NASDAQ:ETSY)

This company has been moved to the archive! The financial data has not been updated since November 3, 2022.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Etsy Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 14.13%
01 FCFF0 560,141
1 FCFF1 638,494 = 560,141 × (1 + 13.99%) 559,434
2 FCFF2 722,005 = 638,494 × (1 + 13.08%) 554,275
3 FCFF3 809,878 = 722,005 × (1 + 12.17%) 544,750
4 FCFF4 901,088 = 809,878 × (1 + 11.26%) 531,052
5 FCFF5 994,381 = 901,088 × (1 + 10.35%) 513,470
5 Terminal value (TV5) 29,040,780 = 994,381 × (1 + 10.35%) ÷ (14.13% – 10.35%) 14,995,841
Intrinsic value of Etsy Inc. capital 17,698,823
Less: Debt and finance lease liabilities (fair value) 3,786,238
Intrinsic value of Etsy Inc. common stock 13,912,585
 
Intrinsic value of Etsy Inc. common stock (per share) $110.69
Current share price $100.03

Based on: 10-K (reporting date: 2021-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Etsy Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 12,572,602 0.77 18.28%
Debt and finance lease liabilities (fair value) 3,786,238 0.23 0.37% = 0.46% × (1 – 20.50%)

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 125,688,316 × $100.03
= $12,572,602,249.48

   Debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (21.00% + 4.50% + 21.00% + 21.00% + 35.00%) ÷ 5
= 20.50%

WACC = 14.13%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Etsy Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Interest expense 9,885 42,025 24,320 22,178 11,130
Net income 493,507 349,246 95,894 77,491 81,800
 
Effective income tax rate (EITR)1 21.00% 4.50% 21.00% 21.00% 35.00%
 
Interest expense, after tax2 7,809 40,134 19,213 17,521 7,235
Interest expense (after tax) and dividends 7,809 40,134 19,213 17,521 7,235
 
EBIT(1 – EITR)3 501,316 389,380 115,107 95,012 89,035
 
Finance lease obligations, current 2,418 8,537 8,275 3,884 5,798
Finance lease obligations, net of current portion 110,283 44,979 53,611 2,095 4,115
Facility financing obligation — — — 59,991 60,049
Long-term debt, net 2,275,418 1,062,299 785,126 276,486 —
Stockholders’ equity 628,619 742,424 406,634 400,898 396,894
Total capital 3,016,738 1,858,239 1,253,646 743,354 466,856
Financial Ratios
Retention rate (RR)4 0.98 0.90 0.83 0.82 0.92
Return on invested capital (ROIC)5 16.62% 20.95% 9.18% 12.78% 19.07%
Averages
RR 0.89
ROIC 15.72%
 
FCFF growth rate (g)6 13.99%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 See details »

2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 9,885 × (1 – 21.00%)
= 7,809

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 493,507 + 7,809
= 501,316

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [501,316 – 7,809] ÷ 501,316
= 0.98

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 501,316 ÷ 3,016,738
= 16.62%

6 g = RR × ROIC
= 0.89 × 15.72%
= 13.99%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (16,358,840 × 14.13% – 560,141) ÷ (16,358,840 + 560,141)
= 10.35%

where:

Total capital, fair value0 = current fair value of Etsy Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Etsy Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Etsy Inc. capital

FCFF growth rate (g) forecast

Etsy Inc., H-model

Microsoft Excel
Year Value gt
1 g1 13.99%
2 g2 13.08%
3 g3 12.17%
4 g4 11.26%
5 and thereafter g5 10.35%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 13.99% + (10.35% – 13.99%) × (2 – 1) ÷ (5 – 1)
= 13.08%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 13.99% + (10.35% – 13.99%) × (3 – 1) ÷ (5 – 1)
= 12.17%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 13.99% + (10.35% – 13.99%) × (4 – 1) ÷ (5 – 1)
= 11.26%