What is NTAP's Intrinsic value?

NetApp Inc (NTAP) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, NetApp Inc's estimated intrinsic value ranges from $54.77 to $124.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $124.64 +17.3%
Discounted Cash Flow (5Y) $111.77 +5.2%
Dividend Discount Model (Multi-Stage) $86.36 -18.7%
Dividend Discount Model (Stable) $89.32 -15.9%
Earnings Power Value $54.77 -48.5%

Is NetApp Inc (NTAP) undervalued or overvalued?

With the current market price at $106.25, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate NetApp Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.98 1.26
Cost of equity 8.4% 11.9%
Cost of debt 5.0% 5.0%
Tax rate 17.5% 20.5%
Debt/Equity ratio 0.11 0.11
After-tax WACC 8.0% 11.1%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 9.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $6,572 (FY04-2025) to $9,998 (FY04-2035)
  • Net profit margin expansion from 18% to 23%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $112 $23,219M 75.4%
10-Year Growth $125 $25,837M 57.7%
5-Year EBITDA $91 $19,002M 69.9%
10-Year EBITDA $106 $22,002M 50.4%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 35.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.2%
  • Long-term growth rate: 3.5%
  • Fair value: $86.36 (-18.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.9% (Low) to 8.4% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $43 to $135
  • Selected fair value: $89.32 (-15.9% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $1,079M
Discount Rate (WACC) 11.1% - 8.0%
Enterprise Value $9,686M - $13,560M
Net Debt $483M
Equity Value $9,203M - $13,077M
Outstanding Shares 203M
Fair Value $45 - $64
Selected Fair Value $54.77

Key Financial Metrics

Metric Value
Market Capitalization $21612M
Enterprise Value $22095M
Trailing P/E 18.22
Forward P/E 17.21
Trailing EV/EBITDA 9.05
Current Dividend Yield 196.18%
Dividend Growth Rate (5Y) -0.18%
Debt-to-Equity Ratio 0.11

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $37.39
Discounted Cash Flow (5Y) 25% $27.94
Dividend Discount Model (Multi-Stage) 20% $17.27
Dividend Discount Model (Stable) 15% $13.40
Earnings Power Value 10% $5.48
Weighted Average 100% $101.48

Investment Conclusion

Based on our comprehensive valuation analysis, NetApp Inc's weighted average intrinsic value is $101.48, which is approximately 4.5% below the current market price of $106.25.

Key investment considerations:

  • Strong projected earnings growth (18% to 23% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.11)

Given these factors, we believe NetApp Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.