# Intuit Inc. (NASDAQ:INTU)

## Dividend Discount Model (DDM)

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

### Intrinsic Stock Value (Valuation Summary)

Intuit Inc., dividends per share (DPS) forecast

US\$

Year Value DPSt or Terminal value (TVt) Calculation Present value at 15.67%
0 DPS01 3.60
1 DPS1 4.04 = 3.60 × (1 + 12.16%) 3.49
2 DPS2 4.56 = 4.04 × (1 + 12.87%) 3.41
3 DPS3 5.18 = 4.56 × (1 + 13.59%) 3.34
4 DPS4 5.92 = 5.18 × (1 + 14.30%) 3.31
5 DPS5 6.81 = 5.92 × (1 + 15.02%) 3.29
5 Terminal value (TV5) 1,196.90 = 6.81 × (1 + 15.02%) ÷ (15.67%15.02%) 577.93
Intrinsic value of Intuit Inc. common stock (per share) \$594.77
Current share price \$633.07

Based on: 10-K (reporting date: 2024-07-31).

1 DPS0 = Sum of the last year dividends per share of Intuit Inc. common stock. 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.

### Required Rate of Return (r)

 Assumptions Rate of return on LT Treasury Composite1 RF 4.06% Expected rate of return on market portfolio2 E(RM) 13.81% Systematic risk of Intuit Inc. common stock βINTU 1.19 Required rate of return on Intuit Inc. common stock3 rINTU 15.67%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

3 rINTU = RF + βINTU [E(RM) – RF]
= 4.06% + 1.19 [13.81%4.06%]
= 15.67%

### Dividend Growth Rate (g)

#### Dividend growth rate (g) implied by PRAT model

Intuit Inc., PRAT model

Average Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020 Jul 31, 2019
Selected Financial Data (US\$ in millions)
Dividends and dividend rights declared 1,041 898 781 651 562 500
Net income 2,963 2,384 2,066 2,062 1,826 1,557
Net revenue 16,285 14,368 12,726 9,633 7,679 6,784
Total assets 32,132 27,780 27,734 15,516 10,931 6,283
Stockholders’ equity 18,436 17,269 16,441 9,869 5,106 3,749
Financial Ratios
Retention rate1 0.65 0.62 0.62 0.68 0.69 0.68
Profit margin2 18.19% 16.59% 16.23% 21.41% 23.78% 22.95%
Asset turnover3 0.51 0.52 0.46 0.62 0.70 1.08
Financial leverage4 1.74 1.61 1.69 1.57 2.14 1.68
Averages
Retention rate 0.66
Profit margin 19.86%
Asset turnover 0.56
Financial leverage 1.66

Dividend growth rate (g)5 12.16%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

2024 Calculations

1 Retention rate = (Net income – Dividends and dividend rights declared) ÷ Net income
= (2,9631,041) ÷ 2,963
= 0.65

2 Profit margin = 100 × Net income ÷ Net revenue
= 100 × 2,963 ÷ 16,285
= 18.19%

3 Asset turnover = Net revenue ÷ Total assets
= 16,285 ÷ 32,132
= 0.51

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 32,132 ÷ 18,436
= 1.74

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.66 × 19.86% × 0.56 × 1.66
= 12.16%

#### Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × (\$633.07 × 15.67%\$3.60) ÷ (\$633.07 + \$3.60)
= 15.02%

where:
P0 = current price of share of Intuit Inc. common stock
D0 = the last year dividends per share of Intuit Inc. common stock
r = required rate of return on Intuit Inc. common stock

#### Dividend growth rate (g) forecast

Intuit Inc., H-model

Year Value gt
1 g1 12.16%
2 g2 12.87%
3 g3 13.59%
4 g4 14.30%
5 and thereafter g5 15.02%

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

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 12.16% + (15.02%12.16%) × (2 – 1) ÷ (5 – 1)
= 12.87%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 12.16% + (15.02%12.16%) × (3 – 1) ÷ (5 – 1)
= 13.59%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 12.16% + (15.02%12.16%) × (4 – 1) ÷ (5 – 1)
= 14.30%