Even with the new buyback program, ADSK 0.00%↑ may not produce enough cash flows to justify the current market valuation. Great stocks are not a buy at any price:
I cursory looked at yuor model and while I tend to agree that ADSk is currently overvalued I do not understand how do you get the FFCF for the base year. I think is way higher but again I could be wrong. In numbers FCFF 1/1/2022 183 m and FCFF in Year 1132 m. For me these numbers do not make much sense. In addition if you look at TTM FCF for ADSk is already greater than your estimate for 23.
make a copy of the model so that you can edit. On Cell B67 you have an option to toggle between simple FCFF and what I call full FCFF. Also B66 allows you to adjust EBIT for R&D - this could explain why you see a higher number.
I think capitalizing R&D is appropriate for software (and most) stocks, which drives up operating profits.
Toggle to normal EBIT and Simple FCFF to see if you get something closer to what is reported in the SEC filings.
Right but then you should use the same structure for the following years. It does not make sense that in base year FCFF is 183 and next year is over 1 bn also in the forecast year you seem just to use EBIT(-1t) - Reinvestment which I assume it includes R&D. acquisitions tend to be lumpy. Anyway I just want to add I appreciate it and I understand the hard work you put into it to make it a free model Best Stefano
For the forecast, I start with EBIT(-1t), and then I subtract a consolidated reinvestment value.
This is tricky and fairly subjective.
The reinvestment value is my opinion of what I think the company will need to reinvest in the future. For ADSK, I think it won't be doing expensive capex projects, which shoots up the projected FCFF to $1b+. I have to admit, that I am being quite optimistic on the expectation, as historical data would suggest no more than 150% efficiency or reinvestment rate, while I give them 400%.
Thanks for reading the model, I'm glad you find it useful!
I cursory looked at yuor model and while I tend to agree that ADSk is currently overvalued I do not understand how do you get the FFCF for the base year. I think is way higher but again I could be wrong. In numbers FCFF 1/1/2022 183 m and FCFF in Year 1132 m. For me these numbers do not make much sense. In addition if you look at TTM FCF for ADSk is already greater than your estimate for 23.
Hi Stefano,
make a copy of the model so that you can edit. On Cell B67 you have an option to toggle between simple FCFF and what I call full FCFF. Also B66 allows you to adjust EBIT for R&D - this could explain why you see a higher number.
I think capitalizing R&D is appropriate for software (and most) stocks, which drives up operating profits.
Toggle to normal EBIT and Simple FCFF to see if you get something closer to what is reported in the SEC filings.
Also, for my full FCFF calculation I use:
Adj. EBIT
- tax
- CapEx (adjusted for R&D + Acquisitions)
+ Depreciation
+ Change in WC
- Stock based compensation
Right but then you should use the same structure for the following years. It does not make sense that in base year FCFF is 183 and next year is over 1 bn also in the forecast year you seem just to use EBIT(-1t) - Reinvestment which I assume it includes R&D. acquisitions tend to be lumpy. Anyway I just want to add I appreciate it and I understand the hard work you put into it to make it a free model Best Stefano
Great point.
ADSK did have volatile FCFF.
For the forecast, I start with EBIT(-1t), and then I subtract a consolidated reinvestment value.
This is tricky and fairly subjective.
The reinvestment value is my opinion of what I think the company will need to reinvest in the future. For ADSK, I think it won't be doing expensive capex projects, which shoots up the projected FCFF to $1b+. I have to admit, that I am being quite optimistic on the expectation, as historical data would suggest no more than 150% efficiency or reinvestment rate, while I give them 400%.
Thanks for reading the model, I'm glad you find it useful!