NetApp, Inc.NTAPNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $175.96 per share(market-calibrated)

+74.4%

Upside to Fair Value

Current

$100.92

Pure Model

$183.80

Fair Value

$175.96

Bull Case

$228.60

Bear Case

$144.00

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $183.80.

What's Driving This Ratingfor NTAP

✓

CapEx already efficient

CapEx at 2.89% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 27.02% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 3.97% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.9B (vs $6.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $142.52/share (18.8x terminal FCF) while exit multiple gives $225.08/share (36.5x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 76.73% indicates efficient cash generation. FCF reaches $2.3B by Year 10 (23.41% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.35

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.57%

Cost of Debt

Pre-tax Cost of Debt1.96%

Tax Rate14.24%

After-tax Cost of Debt1.68%

Equity Weight (E/V)85.50%

Debt Weight (D/V)14.50%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (85.50% × 10.57%) + (14.50% × 1.68%)

= 9.28%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$6.8B	$7.6B	$8.2B	$8.8B	$9.9B
EBIT	$1.8B	$2.0B	$2.2B	$2.4B	$2.7B
Tax	$263M	$291M	$316M	$340M	$379M
NOPAT	$1.6B	$1.8B	$1.9B	$2.0B	$2.3B
+ Depreciation	$239M	$264M	$286M	$308M	$344M
- Capex	$198M	$218M	$237M	$255M	$285M
- Δ NWC	$26M	$39M	$30M	$32M	$36M
Free Cash Flow	$1.6B	$1.8B	$1.9B	$2.1B	$2.3B
Discount Factor	0.915	0.766	0.642	0.537	0.412
Present Value	$1.5B	$1.3B	$1.2B	$1.1B	$950M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.3B

Terminal Growth Rate3.75%

WACC9.28%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$43.3B

PV of Terminal Value$17.8B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$84.2B

PV of Terminal Value$34.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.0B

PV of Terminal Value$17.8B

Enterprise Value$29.8B

(-) Net Debt$749M

Equity Value$29.1B

Shares Outstanding204M

Price per Share$142.52

Exit Multiple Method

PV of Projected FCFs$12.0B

PV of Terminal Value$34.7B

Enterprise Value$46.7B

(-) Net Debt$749M

Equity Value$45.9B

Shares Outstanding204M

Price per Share$225.08

Pure Model Fair Value

$183.80

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
7.28%	$226.77	$234.99	$245.54	$259.57	$279.13
8.28%	$198.57	$203.54	$209.59	$217.16	$226.86
9.28%	$176.76	$179.99	$183.80	$188.37	$193.95
10.28%	$159.08	$161.30	$163.85	$166.82	$170.33
11.28%	$144.31	$145.88	$147.67	$149.71	$152.06

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$144.00

42.7% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.69

Base Case

$183.80

82.1% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.35

Bull Case

$228.60

126.5% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.15

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.97%

Year 3 Revenue Growth5.46%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin27.02%

Tax Rate14.24%

Historical Capex / Rev2.89%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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