#Splunk stock forum free
Risks: Be aware that Splunk is showing 2 warning signs in our investment analysis, you should know about.įuture Earnings: How does SPLK's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Can we work out why the company is trading at a discount to intrinsic value? For Splunk, we've put together three important items you should look at:
For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.
Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. The DCF model is not a perfect stock valuation tool. Total liabilities exceed total assets, which raises the risk of financial distress.Īlthough the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. Good value based on P/S ratio and estimated fair value. Has sufficient cash runway for more than 3 years based on current free cash flows. Shareholders have been diluted in the past year. SWOT Analysis for Splunkĭebt is well covered by earnings and cashflows. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Beta is a measure of a stock's volatility, compared to the market as a whole.
In this calculation we've used 8.8%, which is based on a levered beta of 1.129. Given that we are looking at Splunk as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.
#Splunk stock forum full
The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 10-year free cash flow (FCF) forecast We do this to reflect that growth tends to slow more in the early years than it does in later years. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. To begin with, we have to get estimates of the next ten years of cash flows. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.Ĭheck out our latest analysis for Splunk Crunching The Numbers Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Believe it or not, it's not too difficult to follow, as you'll see from our example! Our analysis will employ the Discounted Cash Flow (DCF) model. ( NASDAQ:SPLK) by projecting its future cash flows and then discounting them to today's value. Today we will run through one way of estimating the intrinsic value of Splunk Inc. Splunk's estimated fair value is US$163 based on 2 Stage Free Cash Flow to EquityĬurrent share price of US$99.15 suggests Splunk is potentially 39% undervaluedĪnalyst price target for SPLK is US$119 which is 27% below our fair value estimate
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