NetApp, Inc.NTAPNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $176.58 per share(market-calibrated)

+81.1%

Upside to Fair Value

Current

$97.51

Pure Model

$184.54

Fair Value

$176.58

Bull Case

$229.59

Bear Case

$144.59

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: $184.54.

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 3.91% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.8B (vs $6.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $143.45/share (18.9x terminal FCF) while exit multiple gives $225.63/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)85.07%

Debt Weight (D/V)14.93%

WACC Calculation

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

WACC = (85.07% × 10.57%) + (14.93% × 1.68%)

= 9.24%

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	$9.8B
EBIT	$1.8B	$2.0B	$2.2B	$2.4B	$2.7B
Tax	$263M	$291M	$315M	$339M	$379M
NOPAT	$1.6B	$1.8B	$1.9B	$2.0B	$2.3B
+ Depreciation	$238M	$264M	$286M	$308M	$344M
- Capex	$197M	$218M	$237M	$255M	$285M
- Δ NWC	$26M	$37M	$30M	$32M	$36M
Free Cash Flow	$1.6B	$1.8B	$1.9B	$2.1B	$2.3B
Discount Factor	0.915	0.767	0.643	0.539	0.413
Present Value	$1.5B	$1.3B	$1.2B	$1.1B	$952M

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%

WACC9.24%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$43.5B

PV of Terminal Value$18.0B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$84.1B

PV of Terminal Value$34.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.0B

PV of Terminal Value$18.0B

Enterprise Value$30.0B

(-) Net Debt$749M

Equity Value$29.3B

Shares Outstanding204M

Price per Share$143.45

Exit Multiple Method

PV of Projected FCFs$12.0B

PV of Terminal Value$34.7B

Enterprise Value$46.8B

(-) Net Debt$749M

Equity Value$46.0B

Shares Outstanding204M

Price per Share$225.63

Pure Model Fair Value

$184.54

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%
7.24%	$227.87	$236.26	$247.05	$261.45	$281.62
8.24%	$199.38	$204.43	$210.60	$218.32	$228.24
9.24%	$177.39	$180.67	$184.54	$189.19	$194.87
10.24%	$159.60	$161.84	$164.43	$167.44	$171.01
11.24%	$144.74	$146.33	$148.14	$150.20	$152.59

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

$144.59

48.3% vs current

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

Base Case

$184.54

89.3% vs current

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

Bull Case

$229.59

135.5% 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 Growth3.91%

Year 3 Revenue Growth5.22%

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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