Intrinsic value of MicroStrategy Incorporated - MSTR

Previous Close

$139.89

  Intrinsic Value

$105.22

stock screener

  Rating & Target

sell

-25%

Previous close

$139.89

 
Intrinsic value

$105.22

 
Up/down potential

-25%

 
Rating

sell

We calculate the intrinsic value of MSTR 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 0001), $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 1.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  508
  520
  533
  548
  565
  583
  603
  624
  647
  672
  699
  727
  757
  789
  823
  860
  898
  938
  981
  1,026
  1,073
  1,124
  1,176
  1,232
  1,291
  1,353
  1,418
  1,486
  1,558
  1,634
Variable operating expenses, $m
  434
  444
  456
  469
  483
  498
  515
  534
  553
  575
  597
  622
  647
  675
  704
  735
  768
  802
  839
  877
  918
  961
  1,006
  1,053
  1,104
  1,156
  1,212
  1,270
  1,332
  1,397
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
  434
  444
  456
  469
  483
  498
  515
  534
  553
  575
  597
  622
  647
  675
  704
  735
  768
  802
  839
  877
  918
  961
  1,006
  1,053
  1,104
  1,156
  1,212
  1,270
  1,332
  1,397
Operating income, $m
  74
  75
  77
  79
  82
  85
  87
  91
  94
  97
  101
  105
  110
  114
  119
  125
  130
  136
  142
  149
  156
  163
  171
  179
  187
  196
  206
  215
  226
  237
EBITDA, $m
  77
  79
  81
  83
  86
  89
  92
  95
  99
  102
  106
  111
  115
  120
  125
  131
  137
  143
  149
  156
  164
  171
  179
  188
  197
  206
  216
  226
  237
  249
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  20
  22
  24
  26
  28
  30
  33
  35
  37
Earnings before tax, $m
  74
  75
  77
  78
  80
  82
  84
  87
  89
  92
  95
  98
  102
  105
  109
  113
  117
  122
  127
  132
  137
  143
  148
  155
  161
  168
  175
  183
  191
  199
Tax expense, $m
  20
  20
  21
  21
  22
  22
  23
  23
  24
  25
  26
  27
  27
  28
  29
  31
  32
  33
  34
  36
  37
  38
  40
  42
  44
  45
  47
  49
  52
  54
Net income, $m
  54
  55
  56
  57
  58
  60
  62
  63
  65
  67
  69
  72
  74
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  128
  134
  139
  146

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  548
  561
  575
  591
  609
  629
  650
  673
  698
  725
  754
  784
  817
  852
  888
  927
  968
  1,012
  1,058
  1,107
  1,158
  1,212
  1,269
  1,329
  1,392
  1,459
  1,529
  1,603
  1,681
  1,762
Adjusted assets (=assets-cash), $m
  548
  561
  575
  591
  609
  629
  650
  673
  698
  725
  754
  784
  817
  852
  888
  927
  968
  1,012
  1,058
  1,107
  1,158
  1,212
  1,269
  1,329
  1,392
  1,459
  1,529
  1,603
  1,681
  1,762
Revenue / Adjusted assets
  0.927
  0.927
  0.927
  0.927
  0.928
  0.927
  0.928
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.926
  0.927
  0.928
  0.928
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
  0.927
Average production assets, $m
  54
  56
  57
  59
  60
  62
  64
  67
  69
  72
  75
  78
  81
  84
  88
  92
  96
  100
  105
  110
  115
  120
  126
  132
  138
  145
  152
  159
  167
  175
Working capital, $m
  -58
  -59
  -61
  -62
  -64
  -66
  -69
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -107
  -112
  -117
  -122
  -128
  -134
  -140
  -147
  -154
  -162
  -169
  -178
  -186
Total debt, $m
  7
  14
  23
  33
  44
  56
  69
  83
  98
  114
  131
  150
  170
  191
  213
  237
  262
  288
  316
  346
  377
  410
  444
  481
  519
  560
  602
  647
  694
  744
Total liabilities, $m
  333
  340
  349
  359
  370
  382
  395
  409
  424
  440
  458
  476
  496
  517
  539
  563
  588
  614
  642
  672
  703
  736
  770
  807
  845
  886
  928
  973
  1,020
  1,070
Total equity, $m
  215
  220
  226
  232
  239
  247
  256
  265
  274
  285
  296
  308
  321
  335
  349
  364
  381
  398
  416
  435
  455
  476
  499
  522
  547
  573
  601
  630
  660
  693
Total liabilities and equity, $m
  548
  560
  575
  591
  609
  629
  651
  674
  698
  725
  754
  784
  817
  852
  888
  927
  969
  1,012
  1,058
  1,107
  1,158
  1,212
  1,269
  1,329
  1,392
  1,459
  1,529
  1,603
  1,680
  1,763
Debt-to-equity ratio
  0.030
  0.060
  0.100
  0.140
  0.180
  0.230
  0.270
  0.310
  0.360
  0.400
  0.440
  0.490
  0.530
  0.570
  0.610
  0.650
  0.690
  0.720
  0.760
  0.790
  0.830
  0.860
  0.890
  0.920
  0.950
  0.980
  1.000
  1.030
  1.050
  1.070
Adjusted equity ratio
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393
  0.393

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  54
  55
  56
  57
  58
  60
  62
  63
  65
  67
  69
  72
  74
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  113
  118
  123
  128
  134
  139
  146
Depreciation, amort., depletion, $m
  4
  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
Funds from operations, $m
  57
  59
  60
  61
  63
  64
  66
  68
  70
  72
  75
  77
  80
  83
  86
  89
  92
  96
  100
  104
  108
  112
  117
  122
  127
  133
  138
  144
  151
  158
Change in working capital, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
Cash from operations, $m
  59
  60
  61
  63
  65
  66
  68
  70
  73
  75
  78
  80
  83
  86
  90
  93
  97
  100
  105
  109
  113
  118
  123
  128
  134
  140
  146
  152
  159
  166
Maintenance CAPEX, $m
  -4
  -4
  -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
New CAPEX, $m
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
Cash from investing activities, $m
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -6
  -7
  -8
  -8
  -8
  -8
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -17
  -19
  -19
Free cash flow, $m
  54
  55
  56
  57
  59
  60
  62
  64
  66
  68
  70
  72
  75
  77
  80
  83
  86
  90
  93
  97
  101
  105
  109
  114
  119
  124
  129
  135
  140
  147
Issuance/(repayment) of debt, $m
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  22
  24
  25
  26
  28
  30
  31
  33
  35
  36
  38
  40
  43
  45
  47
  50
Total cash flow (excl. dividends), $m
  60
  63
  65
  67
  70
  72
  75
  78
  81
  84
  87
  91
  94
  98
  102
  107
  111
  116
  121
  126
  132
  138
  144
  150
  157
  164
  171
  179
  188
  196
Retained Cash Flow (-), $m
  -4
  -5
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
Prev. year cash balance distribution, $m
  319
  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
  375
  58
  59
  61
  63
  64
  66
  69
  71
  73
  76
  79
  82
  85
  88
  91
  95
  99
  103
  107
  112
  116
  121
  127
  132
  138
  144
  150
  157
  164
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
  359
  53
  51
  50
  48
  47
  45
  43
  41
  38
  36
  34
  31
  28
  26
  23
  21
  18
  16
  14
  12
  10
  8
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  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
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MicroStrategy Incorporated is a provider of enterprise software platforms around the world. The Company is engaged in the design, development, marketing and sales of its software platform through licensing arrangements, and cloud-based subscriptions and related services. It focuses on providing enterprise customers with software platform and services for deploying intelligence applications. Its platform, MicroStrategy 10, consolidates analytics and mobility in a single platform, available both as on-premise software and as a hosted service offering in MicroStrategy Cloud. Its enterprise platform combines business intelligence functionality with data discovery, mobile analytics and identity intelligence generated by digital credentials. MicroStrategy 10 consists of MicroStrategy Analytics, MicroStrategy Mobile and Usher. MicroStrategy Analytics offers solutions to organizations to analyze a range of data and distribute actionable business insight throughout an enterprise.

FINANCIAL RATIOS  of  MicroStrategy Incorporated (MSTR)

Valuation Ratios
P/E Ratio 17.6
Price to Sales 3.1
Price to Book 2.9
Price to Tangible Book
Price to Cash Flow 14.4
Price to Free Cash Flow 14.7
Growth Rates
Sales Growth Rate -3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -84.6%
Cap. Spend. - 3 Yr. Gr. Rate -34%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.8%
Ret/ On Assets - 3 Yr. Avg. 10.4%
Return On Total Capital 18.1%
Ret/ On T. Cap. - 3 Yr. Avg. 15.6%
Return On Equity 18.1%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 81.8%
Gross Margin - 3 Yr. Avg. 79.8%
EBITDA Margin 25.4%
EBITDA Margin - 3 Yr. Avg. 20.5%
Operating Margin 20.9%
Oper. Margin - 3 Yr. Avg. 15.7%
Pre-Tax Margin 22.1%
Pre-Tax Margin - 3 Yr. Avg. 16.7%
Net Profit Margin 17.8%
Net Profit Margin - 3 Yr. Avg. 12.9%
Effective Tax Rate 19.5%
Eff/ Tax Rate - 3 Yr. Avg. 32.4%
Payout Ratio 0%

MSTR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MSTR stock intrinsic value calculation we used $498 million for the last fiscal year's total revenue generated by MicroStrategy Incorporated. The default revenue input number comes from 0001 income statement of MicroStrategy Incorporated. 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 MSTR stock valuation model: a) initial revenue growth rate of 2% 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 MSTR is calculated based on our internal credit rating of MicroStrategy Incorporated, 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 MicroStrategy Incorporated.
    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 MSTR stock the variable cost ratio is equal to 85.5%.

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 MSTR 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 5.4% for MicroStrategy Incorporated.

Corporate tax rate of 27% is the nominal tax rate for MicroStrategy Incorporated. 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 MSTR 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 MSTR are equal to 10.7%.

Life of production assets of 14.6 years is the average useful life of capital assets used in MicroStrategy Incorporated 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 MSTR is equal to -11.4%. 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 - $529.731 million for MicroStrategy Incorporated - 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 10.247 million for MicroStrategy Incorporated 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 MicroStrategy Incorporated at the current share price and the inputted number of shares is $1.4 billion.

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