Stock Analysis on Net
Stock Analysis on Net

Dell Technologies Inc. (NYSE:DELL)

Present Value of Free Cash Flow to Equity (FCFE)

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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 equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Dell Technologies Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 13.67%
01 FCFE0 557
1 FCFE1 1,513 = 557 × (1 + 171.57%) 1,331
2 FCFE2 3,507 = 1,513 × (1 + 131.83%) 2,714
3 FCFE3 6,736 = 3,507 × (1 + 92.09%) 4,587
4 FCFE4 10,262 = 6,736 × (1 + 52.34%) 6,147
5 FCFE5 11,555 = 10,262 × (1 + 12.60%) 6,090
5 Terminal value (TV5) 1,217,187 = 11,555 × (1 + 12.60%) ÷ (13.67% – 12.60%) 641,486
Intrinsic value of Dell Technologies Inc. common stock 662,355
 
Intrinsic value of Dell Technologies Inc. common stock (per share) $949.15
Current share price $84.08

Based on: 10-K (reporting date: 2025-01-31).

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.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.90%
Expected rate of return on market portfolio2 E(RM) 15.01%
Systematic risk of Dell Technologies Inc. common stock βDELL 0.87
 
Required rate of return on Dell Technologies Inc. common stock3 rDELL 13.67%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rDELL = RF + βDELL [E(RM) – RF]
= 4.90% + 0.87 [15.01% – 4.90%]
= 13.67%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Dell Technologies Inc., PRAT model

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Average Jan 31, 2025 Feb 2, 2024 Feb 3, 2023 Jan 28, 2022 Jan 29, 2021 Jan 31, 2020
Selected Financial Data (US$ in millions)
Dividends and dividend equivalents declared 1,299 1,109 986 — — —
Net income attributable to Dell Technologies Inc. 4,592 3,211 2,442 5,563 3,250 4,616
Net revenue 95,567 88,425 102,301 101,197 94,224 92,154
Total assets 79,746 82,089 89,611 92,735 123,415 118,861
Total Dell Technologies Inc. stockholders’ equity (deficit) (1,482) (2,404) (3,122) (1,685) 2,479 (1,574)
Financial Ratios
Retention rate1 0.72 0.65 0.60 1.00 1.00 1.00
Profit margin2 4.81% 3.63% 2.39% 5.50% 3.45% 5.01%
Asset turnover3 1.20 1.08 1.14 1.09 0.76 0.78
Financial leverage4 — — — — 49.78 —
Averages
Retention rate 0.83
Profit margin 4.13%
Asset turnover 1.01
Financial leverage 49.78
 
FCFE growth rate (g)5 171.57%

Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31).

2025 Calculations

1 Retention rate = (Net income attributable to Dell Technologies Inc. – Dividends and dividend equivalents declared) ÷ Net income attributable to Dell Technologies Inc.
= (4,592 – 1,299) ÷ 4,592
= 0.72

2 Profit margin = 100 × Net income attributable to Dell Technologies Inc. ÷ Net revenue
= 100 × 4,592 ÷ 95,567
= 4.81%

3 Asset turnover = Net revenue ÷ Total assets
= 95,567 ÷ 79,746
= 1.20

4 Financial leverage = Total assets ÷ Total Dell Technologies Inc. stockholders’ equity (deficit)
= 79,746 ÷ -1,482
= —

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.83 × 4.13% × 1.01 × 49.78
= 171.57%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (58,674 × 13.67% – 557) ÷ (58,674 + 557)
= 12.60%

where:
Equity market value0 = current market value of Dell Technologies Inc. common stock (US$ in millions)
FCFE0 = the last year Dell Technologies Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Dell Technologies Inc. common stock

FCFE growth rate (g) forecast

Dell Technologies Inc., H-model

Microsoft Excel
Year Value gt
1 g1 171.57%
2 g2 131.83%
3 g3 92.09%
4 g4 52.34%
5 and thereafter g5 12.60%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 171.57% + (12.60% – 171.57%) × (2 – 1) ÷ (5 – 1)
= 131.83%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 171.57% + (12.60% – 171.57%) × (3 – 1) ÷ (5 – 1)
= 92.09%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 171.57% + (12.60% – 171.57%) × (4 – 1) ÷ (5 – 1)
= 52.34%