Intrinsic value of Dupont Fabros Technology - DFT

Previous Close

$66.31

  Intrinsic Value

$2.69

stock screener

  Rating & Target

str. sell

-96%

  Value-price divergence*

-47%

Previous close

$66.31

 
Intrinsic value

$2.69

 
Up/down potential

-96%

 
Rating

str. sell

 
Value-price divergence*

-47%

Our model is not good at valuating stocks of financial companies, such as DFT.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of DFT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 6.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  17.04
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.23
  5.20
Revenue, $m
  529
  578
  629
  683
  738
  796
  856
  919
  983
  1,051
  1,121
  1,194
  1,269
  1,348
  1,431
  1,516
  1,605
  1,698
  1,795
  1,897
  2,003
  2,113
  2,229
  2,350
  2,476
  2,609
  2,747
  2,892
  3,044
  3,203
  3,370
Variable operating expenses, $m
 
  528
  575
  623
  674
  727
  782
  839
  898
  959
  1,023
  1,090
  1,159
  1,231
  1,306
  1,384
  1,466
  1,551
  1,639
  1,732
  1,828
  1,929
  2,035
  2,145
  2,261
  2,382
  2,508
  2,640
  2,779
  2,924
  3,076
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  318
  528
  575
  623
  674
  727
  782
  839
  898
  959
  1,023
  1,090
  1,159
  1,231
  1,306
  1,384
  1,466
  1,551
  1,639
  1,732
  1,828
  1,929
  2,035
  2,145
  2,261
  2,382
  2,508
  2,640
  2,779
  2,924
  3,076
Operating income, $m
  211
  50
  55
  59
  64
  69
  74
  80
  86
  91
  98
  104
  110
  117
  124
  132
  140
  148
  156
  165
  174
  184
  194
  204
  215
  227
  239
  252
  265
  279
  293
EBITDA, $m
  319
  168
  183
  199
  215
  232
  249
  267
  286
  306
  326
  347
  369
  392
  416
  441
  467
  494
  523
  552
  583
  615
  649
  684
  721
  759
  799
  842
  886
  932
  981
Interest expense (income), $m
  49
  50
  58
  66
  74
  83
  92
  102
  111
  122
  132
  143
  155
  166
  179
  192
  205
  219
  234
  249
  265
  282
  299
  317
  336
  356
  377
  398
  421
  445
  470
Earnings before tax, $m
  181
  0
  -3
  -7
  -10
  -14
  -18
  -22
  -26
  -30
  -35
  -39
  -44
  -49
  -54
  -60
  -66
  -71
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -138
  -147
  -156
  -166
  -177
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  157
  0
  -3
  -7
  -10
  -14
  -18
  -22
  -26
  -30
  -35
  -39
  -44
  -49
  -54
  -60
  -66
  -71
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -138
  -147
  -156
  -166
  -177

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  39
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,038
  3,285
  3,577
  3,880
  4,196
  4,524
  4,865
  5,219
  5,588
  5,970
  6,368
  6,782
  7,213
  7,661
  8,128
  8,614
  9,121
  9,650
  10,202
  10,778
  11,379
  12,008
  12,664
  13,351
  14,070
  14,821
  15,608
  16,432
  17,295
  18,198
  19,145
Adjusted assets (=assets-cash), $m
  2,999
  3,285
  3,577
  3,880
  4,196
  4,524
  4,865
  5,219
  5,588
  5,970
  6,368
  6,782
  7,213
  7,661
  8,128
  8,614
  9,121
  9,650
  10,202
  10,778
  11,379
  12,008
  12,664
  13,351
  14,070
  14,821
  15,608
  16,432
  17,295
  18,198
  19,145
Revenue / Adjusted assets
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
  0.176
Average production assets, $m
  2,688
  2,937
  3,198
  3,469
  3,751
  4,045
  4,350
  4,666
  4,996
  5,338
  5,694
  6,064
  6,449
  6,850
  7,267
  7,702
  8,155
  8,628
  9,121
  9,636
  10,174
  10,736
  11,323
  11,937
  12,579
  13,252
  13,955
  14,692
  15,463
  16,271
  17,117
Working capital, $m
  0
  -43
  -47
  -51
  -55
  -59
  -63
  -68
  -73
  -78
  -83
  -88
  -94
  -100
  -106
  -112
  -119
  -126
  -133
  -140
  -148
  -156
  -165
  -174
  -183
  -193
  -203
  -214
  -225
  -237
  -249
Total debt, $m
  1,248
  1,447
  1,648
  1,858
  2,076
  2,303
  2,539
  2,784
  3,038
  3,303
  3,578
  3,864
  4,161
  4,471
  4,793
  5,129
  5,480
  5,845
  6,226
  6,624
  7,040
  7,474
  7,928
  8,403
  8,899
  9,419
  9,962
  10,532
  11,128
  11,752
  12,406
Total liabilities, $m
  2,071
  2,270
  2,471
  2,681
  2,899
  3,126
  3,362
  3,607
  3,861
  4,126
  4,401
  4,687
  4,984
  5,294
  5,616
  5,952
  6,303
  6,668
  7,049
  7,447
  7,863
  8,297
  8,751
  9,226
  9,722
  10,242
  10,785
  11,355
  11,951
  12,575
  13,229
Total equity, $m
  967
  1,015
  1,105
  1,199
  1,296
  1,398
  1,503
  1,613
  1,727
  1,845
  1,968
  2,096
  2,229
  2,367
  2,512
  2,662
  2,818
  2,982
  3,152
  3,330
  3,516
  3,710
  3,913
  4,126
  4,348
  4,580
  4,823
  5,077
  5,344
  5,623
  5,916
Total liabilities and equity, $m
  3,038
  3,285
  3,576
  3,880
  4,195
  4,524
  4,865
  5,220
  5,588
  5,971
  6,369
  6,783
  7,213
  7,661
  8,128
  8,614
  9,121
  9,650
  10,201
  10,777
  11,379
  12,007
  12,664
  13,352
  14,070
  14,822
  15,608
  16,432
  17,295
  18,198
  19,145
Debt-to-equity ratio
  1.291
  1.430
  1.490
  1.550
  1.600
  1.650
  1.690
  1.730
  1.760
  1.790
  1.820
  1.840
  1.870
  1.890
  1.910
  1.930
  1.940
  1.960
  1.980
  1.990
  2.000
  2.010
  2.030
  2.040
  2.050
  2.060
  2.070
  2.070
  2.080
  2.090
  2.100
Adjusted equity ratio
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309
  0.309

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  157
  0
  -3
  -7
  -10
  -14
  -18
  -22
  -26
  -30
  -35
  -39
  -44
  -49
  -54
  -60
  -66
  -71
  -78
  -84
  -91
  -98
  -105
  -113
  -121
  -129
  -138
  -147
  -156
  -166
  -177
Depreciation, amort., depletion, $m
  108
  118
  128
  139
  151
  162
  175
  187
  201
  214
  229
  244
  259
  275
  292
  309
  328
  347
  366
  387
  409
  431
  455
  479
  505
  532
  560
  590
  621
  653
  687
Funds from operations, $m
  303
  118
  125
  133
  141
  149
  157
  166
  175
  184
  194
  204
  215
  226
  237
  249
  262
  275
  289
  303
  318
  333
  350
  367
  385
  403
  423
  443
  465
  487
  511
Change in working capital, $m
  13
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
Cash from operations, $m
  290
  122
  129
  137
  145
  153
  161
  170
  180
  189
  199
  210
  221
  232
  244
  256
  269
  282
  296
  310
  326
  342
  358
  376
  394
  413
  433
  454
  476
  499
  523
Maintenance CAPEX, $m
  0
  -108
  -118
  -128
  -139
  -151
  -162
  -175
  -187
  -201
  -214
  -229
  -244
  -259
  -275
  -292
  -309
  -328
  -347
  -366
  -387
  -409
  -431
  -455
  -479
  -505
  -532
  -560
  -590
  -621
  -653
New CAPEX, $m
  -369
  -250
  -261
  -271
  -282
  -293
  -305
  -317
  -329
  -342
  -356
  -370
  -385
  -401
  -417
  -435
  -453
  -473
  -493
  -515
  -538
  -562
  -587
  -614
  -642
  -672
  -703
  -737
  -771
  -808
  -846
Cash from investing activities, $m
  -261
  -358
  -379
  -399
  -421
  -444
  -467
  -492
  -516
  -543
  -570
  -599
  -629
  -660
  -692
  -727
  -762
  -801
  -840
  -881
  -925
  -971
  -1,018
  -1,069
  -1,121
  -1,177
  -1,235
  -1,297
  -1,361
  -1,429
  -1,499
Free cash flow, $m
  29
  -236
  -249
  -263
  -277
  -291
  -306
  -321
  -337
  -354
  -371
  -389
  -408
  -428
  -449
  -471
  -494
  -518
  -544
  -571
  -599
  -629
  -660
  -693
  -728
  -764
  -803
  -843
  -886
  -930
  -977
Issuance/(repayment) of debt, $m
  47
  199
  201
  210
  218
  227
  236
  245
  254
  265
  275
  286
  298
  310
  323
  336
  350
  365
  381
  398
  416
  434
  454
  475
  496
  519
  544
  569
  596
  624
  654
Issuance/(repurchase) of shares, $m
  126
  87
  93
  100
  108
  115
  123
  131
  140
  148
  158
  167
  177
  188
  199
  210
  222
  235
  248
  262
  277
  292
  308
  325
  343
  361
  381
  401
  423
  446
  469
Cash from financing (excl. dividends), $m  
  140
  286
  294
  310
  326
  342
  359
  376
  394
  413
  433
  453
  475
  498
  522
  546
  572
  600
  629
  660
  693
  726
  762
  800
  839
  880
  925
  970
  1,019
  1,070
  1,123
Total cash flow (excl. dividends), $m
  169
  50
  45
  47
  49
  51
  53
  55
  57
  59
  62
  64
  67
  69
  72
  75
  79
  82
  85
  89
  93
  97
  102
  106
  111
  116
  122
  128
  134
  140
  147
Retained Cash Flow (-), $m
  -11
  -87
  -93
  -100
  -108
  -115
  -123
  -131
  -140
  -148
  -158
  -167
  -177
  -188
  -199
  -210
  -222
  -235
  -248
  -262
  -277
  -292
  -308
  -325
  -343
  -361
  -381
  -401
  -423
  -446
  -469
Prev. year cash balance distribution, $m
 
  39
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2
  -48
  -53
  -59
  -64
  -70
  -76
  -83
  -89
  -96
  -103
  -110
  -118
  -126
  -135
  -144
  -153
  -163
  -173
  -183
  -195
  -206
  -219
  -231
  -245
  -259
  -274
  -289
  -306
  -323
Discount rate, %
 
  8.10
  8.51
  8.93
  9.38
  9.85
  10.34
  10.85
  11.40
  11.97
  12.57
  13.19
  13.85
  14.55
  15.27
  16.04
  16.84
  17.68
  18.57
  19.49
  20.47
  21.49
  22.57
  23.69
  24.88
  26.12
  27.43
  28.80
  30.24
  31.75
  33.34
PV of cash for distribution, $m
 
  2
  -41
  -41
  -41
  -40
  -39
  -37
  -35
  -32
  -29
  -26
  -23
  -20
  -17
  -14
  -12
  -10
  -8
  -6
  -4
  -3
  -2
  -2
  -1
  -1
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  98.5
  97.1
  95.6
  94.3
  92.9
  91.6
  90.3
  89.1
  87.9
  86.7
  85.5
  84.3
  83.2
  82.1
  81.0
  79.9
  78.8
  77.8
  76.7
  75.7
  74.7
  73.7
  72.7
  71.8
  70.8
  69.9
  68.9
  68.0
  67.1
  66.2

DuPont Fabros Technology, Inc. (DFT) is a real estate investment trust (REIT). The Company owns, acquires, develops and operates wholesale data centers. The Company's customers include national and international enterprises across various industries, such as technology, Internet, content providers, cloud providers, media, communications, healthcare and financial services. Its data centers are located in four population centers: Northern Virginia; suburban Chicago, Illinois; Piscataway, New Jersey, and Santa Clara, California. As of December 31, 2016, the Company owned various properties, including 11 operating data centers facilities; five phases of existing data center facilities under development; one shell of a data center under development; two data center facilities with a phase or phases available for development, and parcels of land held for development of four data centers. As of December 31, 2016, the Company's 11 data centers had a total of 3.3 million gross square feet.

FINANCIAL RATIOS  of  Dupont Fabros Technology (DFT)

Valuation Ratios
P/E Ratio 32.1
Price to Sales 9.5
Price to Book 5.2
Price to Tangible Book
Price to Cash Flow 17.4
Price to Free Cash Flow -63.7
Growth Rates
Sales Growth Rate 17%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 62.6%
Cap. Spend. - 3 Yr. Gr. Rate 20.7%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 129.1%
Total Debt to Equity 129.1%
Interest Coverage 5
Management Effectiveness
Return On Assets 7%
Ret/ On Assets - 3 Yr. Avg. 4.8%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 4.1%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 8.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 66.9%
Gross Margin - 3 Yr. Avg. 67.3%
EBITDA Margin 63.9%
EBITDA Margin - 3 Yr. Avg. 53.6%
Operating Margin 39.9%
Oper. Margin - 3 Yr. Avg. 29.1%
Pre-Tax Margin 34.2%
Pre-Tax Margin - 3 Yr. Avg. 21.1%
Net Profit Margin 29.7%
Net Profit Margin - 3 Yr. Avg. 18.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 103.2%

DFT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DFT stock intrinsic value calculation we used $529 million for the last fiscal year's total revenue generated by Dupont Fabros Technology. The default revenue input number comes from 2016 income statement of Dupont Fabros Technology. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DFT stock valuation model: a) initial revenue growth rate of 9.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.1%, whose default value for DFT is calculated based on our internal credit rating of Dupont Fabros Technology, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Dupont Fabros Technology.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DFT stock the variable cost ratio is equal to 91.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DFT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4% for Dupont Fabros Technology.

Corporate tax rate of 27% is the nominal tax rate for Dupont Fabros Technology. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DFT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DFT are equal to 508%.

Life of production assets of 24.9 years is the average useful life of capital assets used in Dupont Fabros Technology operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DFT is equal to -7.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $967 million for Dupont Fabros Technology - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 89.846 million for Dupont Fabros Technology is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Dupont Fabros Technology at the current share price and the inputted number of shares is $6.0 billion.

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Financial statements of DFT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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