Intrinsic value of Workday - WDAY

Previous Close

$106.20

  Intrinsic Value

$1.36

stock screener

  Rating & Target

str. sell

-99%

  Value-price divergence*

-125%

Previous close

$106.20

 
Intrinsic value

$1.36

 
Up/down potential

-99%

 
Rating

str. sell

 
Value-price divergence*

-125%

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

We calculate the intrinsic value of WDAY 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 2017), $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 19.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  35.03
  35.30
  32.27
  29.54
  27.09
  24.88
  22.89
  21.10
  19.49
  18.04
  16.74
  15.56
  14.51
  13.56
  12.70
  11.93
  11.24
  10.61
  10.05
  9.55
  9.09
  8.68
  8.32
  7.98
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
Revenue, $m
  1,569
  2,123
  2,808
  3,637
  4,623
  5,773
  7,094
  8,592
  10,266
  12,119
  14,147
  16,349
  18,721
  21,259
  23,960
  26,818
  29,832
  32,999
  36,316
  39,784
  43,401
  47,170
  51,093
  55,172
  59,412
  63,819
  68,398
  73,157
  78,104
  83,247
  88,598
Variable operating expenses, $m
 
  2,601
  3,436
  4,446
  5,646
  7,047
  8,656
  10,480
  12,519
  14,775
  17,246
  19,912
  22,801
  25,892
  29,181
  32,663
  36,334
  40,190
  44,231
  48,454
  52,860
  57,450
  62,227
  67,195
  72,360
  77,727
  83,304
  89,100
  95,125
  101,389
  107,906
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
  1,961
  2,601
  3,436
  4,446
  5,646
  7,047
  8,656
  10,480
  12,519
  14,775
  17,246
  19,912
  22,801
  25,892
  29,181
  32,663
  36,334
  40,190
  44,231
  48,454
  52,860
  57,450
  62,227
  67,195
  72,360
  77,727
  83,304
  89,100
  95,125
  101,389
  107,906
Operating income, $m
  -392
  -478
  -628
  -809
  -1,023
  -1,274
  -1,562
  -1,888
  -2,253
  -2,657
  -3,099
  -3,563
  -4,080
  -4,633
  -5,222
  -5,845
  -6,501
  -7,191
  -7,914
  -8,670
  -9,458
  -10,280
  -11,135
  -12,024
  -12,948
  -13,908
  -14,906
  -15,943
  -17,021
  -18,142
  -19,308
EBITDA, $m
  -276
  -419
  -554
  -717
  -912
  -1,139
  -1,399
  -1,695
  -2,025
  -2,390
  -2,790
  -3,225
  -3,692
  -4,193
  -4,726
  -5,289
  -5,884
  -6,508
  -7,163
  -7,847
  -8,560
  -9,303
  -10,077
  -10,882
  -11,718
  -12,587
  -13,490
  -14,429
  -15,404
  -16,419
  -17,474
Interest expense (income), $m
  6
  19
  40
  69
  105
  147
  196
  253
  317
  389
  469
  556
  650
  752
  861
  977
  1,100
  1,229
  1,365
  1,507
  1,656
  1,811
  1,973
  2,141
  2,316
  2,498
  2,687
  2,884
  3,088
  3,300
  3,521
Earnings before tax, $m
  -409
  -497
  -667
  -878
  -1,128
  -1,421
  -1,758
  -2,141
  -2,570
  -3,046
  -3,568
  -4,119
  -4,730
  -5,385
  -6,082
  -6,821
  -7,601
  -8,420
  -9,279
  -10,177
  -11,114
  -12,091
  -13,108
  -14,165
  -15,264
  -16,406
  -17,593
  -18,827
  -20,109
  -21,442
  -22,829
Tax expense, $m
  -1
  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
  -408
  -497
  -667
  -878
  -1,128
  -1,421
  -1,758
  -2,141
  -2,570
  -3,046
  -3,568
  -4,119
  -4,730
  -5,385
  -6,082
  -6,821
  -7,601
  -8,420
  -9,279
  -10,177
  -11,114
  -12,091
  -13,108
  -14,165
  -15,264
  -16,406
  -17,593
  -18,827
  -20,109
  -21,442
  -22,829

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,997
  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
  3,166
  2,892
  3,825
  4,956
  6,298
  7,865
  9,665
  11,705
  13,987
  16,510
  19,274
  22,274
  25,506
  28,964
  32,643
  36,537
  40,644
  44,958
  49,477
  54,201
  59,130
  64,265
  69,609
  75,166
  80,943
  86,946
  93,185
  99,669
  106,408
  113,416
  120,705
Adjusted assets (=assets-cash), $m
  1,169
  2,892
  3,825
  4,956
  6,298
  7,865
  9,665
  11,705
  13,987
  16,510
  19,274
  22,274
  25,506
  28,964
  32,643
  36,537
  40,644
  44,958
  49,477
  54,201
  59,130
  64,265
  69,609
  75,166
  80,943
  86,946
  93,185
  99,669
  106,408
  113,416
  120,705
Revenue / Adjusted assets
  1.342
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
  0.734
Average production assets, $m
  326
  439
  581
  753
  957
  1,195
  1,469
  1,778
  2,125
  2,509
  2,928
  3,384
  3,875
  4,401
  4,960
  5,551
  6,175
  6,831
  7,517
  8,235
  8,984
  9,764
  10,576
  11,421
  12,298
  13,210
  14,158
  15,143
  16,167
  17,232
  18,340
Working capital, $m
  1,201
  -212
  -281
  -364
  -462
  -577
  -709
  -859
  -1,027
  -1,212
  -1,415
  -1,635
  -1,872
  -2,126
  -2,396
  -2,682
  -2,983
  -3,300
  -3,632
  -3,978
  -4,340
  -4,717
  -5,109
  -5,517
  -5,941
  -6,382
  -6,840
  -7,316
  -7,810
  -8,325
  -8,860
Total debt, $m
  534
  1,134
  1,974
  2,991
  4,199
  5,610
  7,230
  9,066
  11,119
  13,390
  15,878
  18,578
  21,486
  24,598
  27,909
  31,415
  35,110
  38,993
  43,061
  47,312
  51,748
  56,369
  61,179
  66,180
  71,380
  76,783
  82,397
  88,233
  94,298
  100,605
  107,166
Total liabilities, $m
  2,004
  2,603
  3,443
  4,460
  5,668
  7,079
  8,699
  10,535
  12,588
  14,859
  17,347
  20,047
  22,955
  26,067
  29,378
  32,884
  36,579
  40,462
  44,530
  48,781
  53,217
  57,838
  62,648
  67,649
  72,849
  78,252
  83,866
  89,702
  95,767
  102,074
  108,635
Total equity, $m
  1,163
  289
  383
  496
  630
  787
  967
  1,171
  1,399
  1,651
  1,927
  2,227
  2,551
  2,896
  3,264
  3,654
  4,064
  4,496
  4,948
  5,420
  5,913
  6,426
  6,961
  7,517
  8,094
  8,695
  9,318
  9,967
  10,641
  11,342
  12,071
Total liabilities and equity, $m
  3,167
  2,892
  3,826
  4,956
  6,298
  7,866
  9,666
  11,706
  13,987
  16,510
  19,274
  22,274
  25,506
  28,963
  32,642
  36,538
  40,643
  44,958
  49,478
  54,201
  59,130
  64,264
  69,609
  75,166
  80,943
  86,947
  93,184
  99,669
  106,408
  113,416
  120,706
Debt-to-equity ratio
  0.459
  3.920
  5.160
  6.040
  6.670
  7.130
  7.480
  7.740
  7.950
  8.110
  8.240
  8.340
  8.420
  8.490
  8.550
  8.600
  8.640
  8.670
  8.700
  8.730
  8.750
  8.770
  8.790
  8.800
  8.820
  8.830
  8.840
  8.850
  8.860
  8.870
  8.880
Adjusted equity ratio
  -0.713
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -408
  -497
  -667
  -878
  -1,128
  -1,421
  -1,758
  -2,141
  -2,570
  -3,046
  -3,568
  -4,119
  -4,730
  -5,385
  -6,082
  -6,821
  -7,601
  -8,420
  -9,279
  -10,177
  -11,114
  -12,091
  -13,108
  -14,165
  -15,264
  -16,406
  -17,593
  -18,827
  -20,109
  -21,442
  -22,829
Depreciation, amort., depletion, $m
  116
  60
  74
  91
  111
  135
  163
  194
  228
  267
  309
  338
  388
  440
  496
  555
  618
  683
  752
  824
  898
  976
  1,058
  1,142
  1,230
  1,321
  1,416
  1,514
  1,617
  1,723
  1,834
Funds from operations, $m
  552
  -437
  -593
  -786
  -1,016
  -1,286
  -1,596
  -1,948
  -2,342
  -2,779
  -3,259
  -3,780
  -4,343
  -4,945
  -5,586
  -6,266
  -6,983
  -7,737
  -8,527
  -9,354
  -10,216
  -11,115
  -12,050
  -13,023
  -14,034
  -15,085
  -16,177
  -17,313
  -18,492
  -19,719
  -20,995
Change in working capital, $m
  203
  -55
  -69
  -83
  -99
  -115
  -132
  -150
  -167
  -185
  -203
  -220
  -237
  -254
  -270
  -286
  -301
  -317
  -332
  -347
  -362
  -377
  -392
  -408
  -424
  -441
  -458
  -476
  -495
  -514
  -535
Cash from operations, $m
  349
  -382
  -525
  -704
  -918
  -1,171
  -1,463
  -1,798
  -2,175
  -2,594
  -3,056
  -3,560
  -4,105
  -4,691
  -5,316
  -5,980
  -6,682
  -7,421
  -8,196
  -9,007
  -9,854
  -10,738
  -11,658
  -12,615
  -13,610
  -14,645
  -15,720
  -16,837
  -17,998
  -19,205
  -20,460
Maintenance CAPEX, $m
  0
  -33
  -44
  -58
  -75
  -96
  -119
  -147
  -178
  -213
  -251
  -293
  -338
  -388
  -440
  -496
  -555
  -618
  -683
  -752
  -824
  -898
  -976
  -1,058
  -1,142
  -1,230
  -1,321
  -1,416
  -1,514
  -1,617
  -1,723
New CAPEX, $m
  -121
  -114
  -142
  -172
  -204
  -238
  -274
  -310
  -347
  -383
  -420
  -456
  -491
  -525
  -559
  -592
  -624
  -655
  -687
  -718
  -749
  -780
  -812
  -844
  -878
  -912
  -948
  -985
  -1,024
  -1,065
  -1,108
Cash from investing activities, $m
  -169
  -147
  -186
  -230
  -279
  -334
  -393
  -457
  -525
  -596
  -671
  -749
  -829
  -913
  -999
  -1,088
  -1,179
  -1,273
  -1,370
  -1,470
  -1,573
  -1,678
  -1,788
  -1,902
  -2,020
  -2,142
  -2,269
  -2,401
  -2,538
  -2,682
  -2,831
Free cash flow, $m
  180
  -528
  -711
  -933
  -1,197
  -1,504
  -1,856
  -2,255
  -2,699
  -3,190
  -3,727
  -4,309
  -4,935
  -5,604
  -6,315
  -7,068
  -7,861
  -8,694
  -9,565
  -10,476
  -11,427
  -12,416
  -13,446
  -14,517
  -15,630
  -16,787
  -17,988
  -19,238
  -20,536
  -21,886
  -23,291
Issuance/(repayment) of debt, $m
  0
  600
  840
  1,017
  1,208
  1,410
  1,620
  1,836
  2,053
  2,271
  2,487
  2,700
  2,908
  3,112
  3,311
  3,505
  3,696
  3,883
  4,068
  4,252
  4,436
  4,621
  4,809
  5,002
  5,199
  5,403
  5,615
  5,835
  6,066
  6,307
  6,560
Issuance/(repurchase) of shares, $m
  58
  653
  761
  991
  1,262
  1,578
  1,938
  2,345
  2,799
  3,298
  3,844
  4,419
  5,053
  5,731
  6,450
  7,211
  8,011
  8,852
  9,731
  10,650
  11,607
  12,604
  13,642
  14,721
  15,842
  17,007
  18,217
  19,475
  20,783
  22,143
  23,558
Cash from financing (excl. dividends), $m  
  60
  1,253
  1,601
  2,008
  2,470
  2,988
  3,558
  4,181
  4,852
  5,569
  6,331
  7,119
  7,961
  8,843
  9,761
  10,716
  11,707
  12,735
  13,799
  14,902
  16,043
  17,225
  18,451
  19,723
  21,041
  22,410
  23,832
  25,310
  26,849
  28,450
  30,118
Total cash flow (excl. dividends), $m
  240
  725
  890
  1,074
  1,273
  1,483
  1,702
  1,926
  2,153
  2,380
  2,604
  2,810
  3,027
  3,239
  3,446
  3,648
  3,846
  4,041
  4,233
  4,425
  4,616
  4,809
  5,005
  5,205
  5,411
  5,623
  5,843
  6,073
  6,313
  6,564
  6,828
Retained Cash Flow (-), $m
  -27
  -653
  -761
  -991
  -1,262
  -1,578
  -1,938
  -2,345
  -2,799
  -3,298
  -3,844
  -4,419
  -5,053
  -5,731
  -6,450
  -7,211
  -8,011
  -8,852
  -9,731
  -10,650
  -11,607
  -12,604
  -13,642
  -14,721
  -15,842
  -17,007
  -18,217
  -19,475
  -20,783
  -22,143
  -23,558
Prev. year cash balance distribution, $m
 
  1,030
  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
 
  1,101
  129
  84
  11
  -94
  -236
  -419
  -646
  -919
  -1,240
  -1,609
  -2,026
  -2,492
  -3,004
  -3,563
  -4,165
  -4,811
  -5,498
  -6,225
  -6,991
  -7,795
  -8,637
  -9,515
  -10,431
  -11,383
  -12,374
  -13,402
  -14,471
  -15,579
  -16,731
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,056
  118
  73
  9
  -73
  -171
  -283
  -404
  -528
  -650
  -764
  -865
  -947
  -1,009
  -1,046
  -1,059
  -1,047
  -1,012
  -958
  -888
  -806
  -717
  -624
  -531
  -443
  -361
  -288
  -224
  -170
  -126
Current shareholders' claim on cash, %
  100
  67.2
  53.2
  42.2
  33.7
  26.9
  21.6
  17.4
  14.0
  11.3
  9.2
  7.5
  6.1
  5.0
  4.1
  3.3
  2.7
  2.2
  1.8
  1.5
  1.3
  1.0
  0.9
  0.7
  0.6
  0.5
  0.4
  0.3
  0.3
  0.2
  0.2

Workday, Inc. provides enterprise cloud applications for finance and human resources in the United States and internationally. It offers applications for customers to manage critical business functions that enable them to optimize their financial and human capital resources. The company provides Workday Financial Management application that provides functions of general ledger, accounting, accounts payable, accounts receivable, cash management, asset management, employee expense management, revenue management, projects, procurement, inventory, and grants management. It also provides Workday Human Capital Management application that includes human resources management comprising workforce lifecycle management, organization management, compensation, absence, and employee benefits administration; and global talent management consisting of goal management, performance management, succession planning, and career and development planning. In addition, the company offers Workday Recruiting, an application that supports the needs of candidates, hiring managers, the interview team, and recruiters; Workday Payroll application that address the enterprise payroll needs; Workday Time Tracking application that automates workforce management processes; and Workday Professional Services Automation application. Further, it offers Workday Insight Applications that leverage advanced data science and machine learning methodologies to help customers make smarter financial and workforce decisions; and Workday Student, a student and faculty lifecycle information system. The company serves technology, financial services, business and professional services, healthcare and life sciences, manufacturing, retail and hospitality, education, and government and non-profit industries. The company was formerly known as North Tahoe Power Tools, Inc. and changed its name to Workday, Inc. in July 2005. Workday, Inc. was founded in 2005 and is headquartered in Pleasanton, California.

FINANCIAL RATIOS  of  Workday (WDAY)

Valuation Ratios
P/E Ratio -52.8
Price to Sales 13.7
Price to Book 18.5
Price to Tangible Book
Price to Cash Flow 61.8
Price to Free Cash Flow 94.6
Growth Rates
Sales Growth Rate 35%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -9.7%
Cap. Spend. - 3 Yr. Gr. Rate 9.7%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 45.9%
Total Debt to Equity 45.9%
Interest Coverage -67
Management Effectiveness
Return On Assets -13.6%
Ret/ On Assets - 3 Yr. Avg. -11.8%
Return On Total Capital -24.4%
Ret/ On T. Cap. - 3 Yr. Avg. -19.1%
Return On Equity -35.5%
Return On Equity - 3 Yr. Avg. -27.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 69.2%
Gross Margin - 3 Yr. Avg. 67.8%
EBITDA Margin -18.3%
EBITDA Margin - 3 Yr. Avg. -19.4%
Operating Margin -25%
Oper. Margin - 3 Yr. Avg. -25.1%
Pre-Tax Margin -26.1%
Pre-Tax Margin - 3 Yr. Avg. -27.4%
Net Profit Margin -26%
Net Profit Margin - 3 Yr. Avg. -27.5%
Effective Tax Rate 0.2%
Eff/ Tax Rate - 3 Yr. Avg. -0.3%
Payout Ratio 0%

WDAY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WDAY stock intrinsic value calculation we used $1569 million for the last fiscal year's total revenue generated by Workday. The default revenue input number comes from 2017 income statement of Workday. 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 WDAY stock valuation model: a) initial revenue growth rate of 35.3% 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 4.3%, whose default value for WDAY is calculated based on our internal credit rating of Workday, 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 Workday.
    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 WDAY stock the variable cost ratio is equal to 122.8%.

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 WDAY 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 3.5% for Workday.

Corporate tax rate of 27% is the nominal tax rate for Workday. 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 WDAY 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 WDAY are equal to 20.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Workday 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 WDAY is equal to -10%. 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 - $1163 million for Workday - 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 184.815 million for Workday 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 Workday at the current share price and the inputted number of shares is $19.6 billion.

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COMPANY NEWS

▶ ETFs with exposure to Workday, Inc. : July 25, 2017   [Jul-25-17 02:09PM  Capital Cube]
▶ Trading tech ahead of earnings: 5 picks   [Jul-19-17 05:00PM  CNBC Videos]
▶ ETFs with exposure to Workday, Inc. : July 14, 2017   [Jul-14-17 05:34PM  Capital Cube]
▶ 3 Biggest Risks Facing Workday Inc.   [Jul-10-17 05:34PM  Motley Fool]
▶ Workday has potential to double its value: Josh Spencer   [Jun-27-17 12:37PM  CNBC Videos]
▶ It Sounds Crazy, But Workday Is Cheap   [08:11AM  Motley Fool]
▶ ETFs with exposure to Workday, Inc. : June 26, 2017   [Jun-26-17 05:13PM  Capital Cube]
▶ 4 Reasons to Like Workday, Inc.   [Jun-24-17 03:09PM  Motley Fool]
▶ ETFs with exposure to Workday, Inc. : June 14, 2017   [Jun-14-17 01:55PM  Capital Cube]
▶ Why Workday, Inc. Stock Rose 14% in May   [Jun-13-17 04:55PM  Motley Fool]
▶ [$$] Workday Stock Might Take Some Time Off   [Jun-05-17 12:41PM  Barrons.com]
▶ ETFs with exposure to Workday, Inc. : June 2, 2017   [Jun-02-17 02:37PM  Capital Cube]
▶ Extend Your Workday   [02:21PM  TheStreet.com]
▶ Bond market was right about jobs: Cramer   [09:10AM  CNBC Videos]
▶ Workday, Inc. Raises Guidance After Another Good Quarter   [Jun-01-17 08:32PM  Motley Fool]
▶ Workday: Cramer's Top Takeaways   [07:37PM  TheStreet.com]
▶ Workday reports 1Q loss   [04:18PM  Associated Press]
▶ This Top Software Firm Has Flipped From Losses: 220% EPS Gain Seen Thursday   [May-30-17 08:19AM  Investor's Business Daily]
▶ The Sentiment On Workday Could Not Be More Bullish   [May-26-17 02:32PM  Benzinga]
▶ Southampton Football Club Doubles Up with Workday   [May-24-17 04:01AM  GlobeNewswire]
▶ Is Workday Having a 'Breakout Shakeout'?   [May-23-17 02:11PM  TheStreet.com]
▶ Cramer: Get Your Head Into the Cloud   [May-22-17 07:01PM  TheStreet.com]
▶ 3 Stocks That Feel Like Microsoft in 1986   [May-17-17 02:19PM  Motley Fool]
▶ Tech trades still working: 5 stocks to buy   [May-16-17 05:00PM  CNBC Videos]
▶ Workday Continues Momentum in Canada   [Apr-13-17 08:30AM  Marketwired]
▶ Workday to Equip Target with Cloud HR   [08:30AM  Marketwired]
▶ ETFs with exposure to Workday, Inc. : April 10, 2017   [Apr-10-17 02:00PM  Capital Cube]
▶ Workday Lines Up Mickelson as Brand Ambassador   [Apr-04-17 01:56PM  TheStreet.com]
▶ AmazonWorkday Deal Signals Strategy to Bring Rivals to AWS   [Apr-03-17 07:37AM  Market Realist]
▶ How artificial intelligence will affect your job   [Mar-31-17 09:51AM  at MarketWatch]
▶ ETFs with exposure to Workday, Inc. : March 30, 2017   [Mar-29-17 08:37PM  Capital Cube]
▶ Workday in a Balancing Act Between Long and Short Terms   [Mar-28-17 11:34AM  TheStreet.com]
▶ Adobe Is Digital Growth and A Top Tech Stock   [Mar-17-17 02:45PM  Zacks]
▶ Dentsu Aegis Network Selects Workday   [06:01AM  GlobeNewswire]
▶ Dentsu Aegis Network Selects Workday   [06:00AM  Marketwired]
▶ How AI Is Transforming the Workplace   [Mar-13-17 12:49AM  at The Wall Street Journal]
▶ How AI Is Transforming the Workplace   [Mar-12-17 11:38PM  at The Wall Street Journal]
▶ Workday Named a Best Company to Work For by Fortune   [Mar-09-17 08:18AM  Marketwired]
Stock chart of WDAY Financial statements of WDAY
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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