Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Intuit Inc. (NASDAQ:INTU)

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

Intermediate level

Intrinsic Stock Value (Valuation Summary)

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

US$ in millions, except per share data

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Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.63%
01 FCFF0 2,289
1 FCFF1 2,806 = 2,289 × (1 + 22.61%) 2,491
2 FCFF2 3,355 = 2,806 × (1 + 19.56%) 2,645
3 FCFF3 3,909 = 3,355 × (1 + 16.50%) 2,736
4 FCFF4 4,434 = 3,909 × (1 + 13.45%) 2,755
5 FCFF5 4,895 = 4,434 × (1 + 10.39%) 2,701
5 Terminal value (TV5) 241,080 = 4,895 × (1 + 10.39%) ÷ (12.63%10.39%) 133,001
Intrinsic value of Intuit Inc.’s capital 146,329
Less: Debt (fair value) 3,428
Intrinsic value of Intuit Inc.’s common stock 142,901
 
Intrinsic value of Intuit Inc.’s common stock (per share) $521.84
Current share price $399.09

Based on: 10-K (filing date: 2020-08-31).

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.


Weighted Average Cost of Capital (WACC)

Intuit Inc., cost of capital

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Value1 Weight Required rate of return2 Calculation
Equity (fair value) 109,287 0.97 13.00%
Debt (fair value) 3,428 0.03 1.05% = 1.41% × (1 – 25.78%)

Based on: 10-K (filing date: 2020-08-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 273,839,879 × $399.09
= $109,286,757,310.11

   Debt (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
= (16.92% + 17.22% + 16.57% + 28.97% + 33.00% + 41.99%) ÷ 6
= 25.78%

WACC = 12.63%


FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Intuit Inc., PRAT model

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Average Jul 31, 2020 Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015
Selected Financial Data (US$ in millions)
Interest expense 14  15  20  31  35  27 
Net income (loss) from discontinued operations —  —  —  —  173  (48)
Net income 1,826  1,557  1,211  971  979  365 
 
Effective income tax rate (EITR)1 16.92% 17.22% 16.57% 28.97% 33.00% 41.99%
 
Interest expense, after tax2 12  12  17  22  23  16 
Add: Dividends and dividend rights declared 562  500  407  357  319  287 
Interest expense (after tax) and dividends 574  512  424  379  342  303 
 
EBIT(1 – EITR)3 1,838  1,569  1,228  993  829  429 
 
Short-term debt 1,338  50  50  50  512  — 
Long-term debt 2,031  386  388  438  488  500 
Stockholders’ equity 5,106  3,749  2,354  1,354  1,161  2,332 
Total capital 8,475  4,185  2,792  1,842  2,161  2,832 
Financial Ratios
Retention rate (RR)4 0.69 0.67 0.65 0.62 0.59 0.29
Return on invested capital (ROIC)5 21.68% 37.50% 43.97% 53.91% 38.38% 15.14%
Averages
RR 0.64
ROIC 35.10%
 
FCFF growth rate (g)6 22.61%

Based on: 10-K (filing date: 2020-08-31), 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01).

1 See details »

2020 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 14 × (1 – 16.92%)
= 12

3 EBIT(1 – EITR) = Net income – Net income (loss) from discontinued operations + Interest expense, after tax
= 1,8260 + 12
= 1,838

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,838574] ÷ 1,838
= 0.69

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,838 ÷ 8,475
= 21.68%

6 g = RR × ROIC
= 0.64 × 35.10%
= 22.61%


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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (112,715 × 12.63%2,289) ÷ (112,715 + 2,289)
= 10.39%

where:

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


FCFF growth rate (g) forecast

Intuit Inc., H-model

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Year Value gt
1 g1 22.61%
2 g2 19.56%
3 g3 16.50%
4 g4 13.45%
5 and thereafter g5 10.39%

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)
= 22.61% + (10.39%22.61%) × (2 – 1) ÷ (5 – 1)
= 19.56%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 22.61% + (10.39%22.61%) × (3 – 1) ÷ (5 – 1)
= 16.50%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 22.61% + (10.39%22.61%) × (4 – 1) ÷ (5 – 1)
= 13.45%