Stock Analysis on Net
Stock Analysis on Net

Meta Platforms Inc. (NASDAQ:META)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Meta Platforms Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 16.12%
01 FCFF0 54,658
1 FCFF1 67,896 = 54,658 × (1 + 24.22%) 58,471
2 FCFF2 82,380 = 67,896 × (1 + 21.33%) 61,097
3 FCFF3 97,576 = 82,380 × (1 + 18.45%) 62,322
4 FCFF4 112,760 = 97,576 × (1 + 15.56%) 62,024
5 FCFF5 127,053 = 112,760 × (1 + 12.68%) 60,185
5 Terminal value (TV5) 4,158,582 = 127,053 × (1 + 12.68%) ÷ (16.12% – 12.68%) 1,969,913
Intrinsic value of Meta Platforms Inc. capital 2,274,012
Less: Long-term debt and finance lease liabilities (fair value) 28,539
Intrinsic value of Meta Platforms Inc. common stock 2,245,473
 
Intrinsic value of Meta Platforms Inc. common stock (per share) $886.26
Current share price $694.84

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Meta Platforms Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 1,760,488 0.98 16.31%
Long-term debt and finance lease liabilities (fair value) 28,539 0.02 4.48% = 5.31% × (1 – 15.56%)

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 2,533,659,265 × $694.84
= $1,760,487,803,692.60

   Long-term debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (11.80% + 17.60% + 19.50% + 16.70% + 12.20%) ÷ 5
= 15.56%

WACC = 16.12%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Meta Platforms Inc., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Interest expense 715 446 176 15 14
Net income 62,360 39,098 23,200 39,370 29,146
 
Effective income tax rate (EITR)1 11.80% 17.60% 19.50% 16.70% 12.20%
 
Interest expense, after tax2 631 368 142 12 12
Add: Dividends and dividend equivalents declared 5,121 — — — —
Interest expense (after tax) and dividends 5,752 368 142 12 12
 
EBIT(1 – EITR)3 62,991 39,466 23,342 39,382 29,158
 
Finance lease liabilities, current 76 90 129 75 54
Long-term debt 28,826 18,385 9,923 — —
Finance lease liabilities, non-current 633 600 558 506 469
Stockholders’ equity 182,637 153,168 125,713 124,879 128,290
Total capital 212,172 172,243 136,323 125,460 128,813
Financial Ratios
Retention rate (RR)4 0.91 0.99 0.99 1.00 1.00
Return on invested capital (ROIC)5 29.69% 22.91% 17.12% 31.39% 22.64%
Averages
RR 0.98
ROIC 24.75%
 
FCFF growth rate (g)6 24.22%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 See details »

2024 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 715 × (1 – 11.80%)
= 631

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 62,360 + 631
= 62,991

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [62,991 – 5,752] ÷ 62,991
= 0.91

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 62,991 ÷ 212,172
= 29.69%

6 g = RR × ROIC
= 0.98 × 24.75%
= 24.22%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (1,789,027 × 16.12% – 54,658) ÷ (1,789,027 + 54,658)
= 12.68%

where:

Total capital, fair value0 = current fair value of Meta Platforms Inc. debt and equity (US$ in millions)
FCFF0 = the last year Meta Platforms Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Meta Platforms Inc. capital

FCFF growth rate (g) forecast

Meta Platforms Inc., H-model

Microsoft Excel
Year Value gt
1 g1 24.22%
2 g2 21.33%
3 g3 18.45%
4 g4 15.56%
5 and thereafter g5 12.68%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 24.22% + (12.68% – 24.22%) × (2 – 1) ÷ (5 – 1)
= 21.33%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 24.22% + (12.68% – 24.22%) × (3 – 1) ÷ (5 – 1)
= 18.45%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 24.22% + (12.68% – 24.22%) × (4 – 1) ÷ (5 – 1)
= 15.56%