Stock Analysis on Net

Intuit Inc. (NASDAQ:INTU)

Present Value of Free Cash Flow to Equity (FCFE) 

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Intrinsic Stock Value (Valuation Summary)

Intuit Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 12.93%
01 FCFE0 1,787
1 FCFE1 2,395 = 1,787 × (1 + 34.02%) 2,121
2 FCFE2 3,072 = 2,395 × (1 + 28.28%) 2,409
3 FCFE3 3,764 = 3,072 × (1 + 22.53%) 2,613
4 FCFE4 4,397 = 3,764 × (1 + 16.79%) 2,703
5 FCFE5 4,882 = 4,397 × (1 + 11.05%) 2,658
5 Terminal value (TV5) 287,333 = 4,882 × (1 + 11.05%) ÷ (12.93%11.05%) 156,402
Intrinsic value of Intuit Inc. common stock 168,905
 
Intrinsic value of Intuit Inc. common stock (per share) $597.23
Current share price $371.87

Based on: 10-K (reporting date: 2021-07-31).

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)

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Assumptions
Rate of return on LT Treasury Composite1 RF 3.31%
Expected rate of return on market portfolio2 E(RM) 13.03%
Systematic risk of Intuit Inc. common stock βINTU 0.99
 
Required rate of return on Intuit Inc. common stock3 rINTU 12.93%

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).

2 See details »

3 rINTU = RF + βINTU [E(RM) – RF]
= 3.31% + 0.99 [13.03%3.31%]
= 12.93%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Intuit Inc., PRAT model

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Average Jul 31, 2021 Jul 31, 2020 Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016
Selected Financial Data (US$ in millions)
Dividends and dividend rights declared 651  562  500  407  357  319 
Net income 2,062  1,826  1,557  1,211  971  979 
Net revenue 9,633  7,679  6,784  5,964  5,177  4,694 
Total assets 15,516  10,931  6,283  5,178  4,068  4,250 
Stockholders’ equity 9,869  5,106  3,749  2,354  1,354  1,161 
Financial Ratios
Retention rate1 0.68 0.69 0.68 0.66 0.63 0.67
Profit margin2 21.41% 23.78% 22.95% 20.31% 18.76% 20.86%
Asset turnover3 0.62 0.70 1.08 1.15 1.27 1.10
Financial leverage4 1.57 2.14 1.68 2.20 3.00 3.66
Averages
Retention rate 0.68
Profit margin 21.34%
Asset turnover 0.99
Financial leverage 2.38
 
FCFE growth rate (g)5 34.02%

Based on: 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31), 10-K (reporting date: 2017-07-31), 10-K (reporting date: 2016-07-31).

2021 Calculations

1 Retention rate = (Net income – Dividends and dividend rights declared) ÷ Net income
= (2,062651) ÷ 2,062
= 0.68

2 Profit margin = 100 × Net income ÷ Net revenue
= 100 × 2,062 ÷ 9,633
= 21.41%

3 Asset turnover = Net revenue ÷ Total assets
= 9,633 ÷ 15,516
= 0.62

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 15,516 ÷ 9,869
= 1.57

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.68 × 21.34% × 0.99 × 2.38
= 34.02%


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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (105,169 × 12.93%1,787) ÷ (105,169 + 1,787)
= 11.05%

where:
Equity market value0 = current market value of Intuit Inc. common stock (US$ in millions)
FCFE0 = the last year Intuit Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Intuit Inc. common stock


FCFE growth rate (g) forecast

Intuit Inc., H-model

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Year Value gt
1 g1 34.02%
2 g2 28.28%
3 g3 22.53%
4 g4 16.79%
5 and thereafter g5 11.05%

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 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 34.02% + (11.05%34.02%) × (2 – 1) ÷ (5 – 1)
= 28.28%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 34.02% + (11.05%34.02%) × (3 – 1) ÷ (5 – 1)
= 22.53%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 34.02% + (11.05%34.02%) × (4 – 1) ÷ (5 – 1)
= 16.79%