Microsoft Corporation (MSFT) Discounted Future Market Cap

Microsoft Corporation

MSFT (NASDAQ)

(%)

Valuation
Microsoft Corporation Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("ratio:priceEarningsRatio"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"""
        income:revenue:-1 * 
        (1 + {assumptions.get('%revenue_growth_rate')})
    """,
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("income:revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("profile:price"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	421.7 USD
Estimated net income	148.2 Bil. USD
Estimated market capitalization	4,828 Bil. USD
Market capitalization discounted to present	3,134 Bil. USD
Shares Outstanding	7.43 Bil.
Earnings Per Share (EPS)	14.1 USD
Market Price	459.9 USD
Price to Earnings (PE) Ratio	32.58

Historical and forecasted data

Monetary values in USD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "timeseries": "annual", "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [{"l": "2016", "x": "2016-06-30", "y": 91154000000}, {"l": "2017", "x": "2017-06-30", "y": 96571000000}, {"l": "2018", "x": "2018-06-30", "y": 110360000000}, {"l": "2019", "x": "2019-06-30", "y": 125843000000}, {"l": "2020", "x": "2020-06-30", "y": 143015000000}, {"l": "2021", "x": "2021-06-30", "y": 168088000000}, {"l": "2022", "x": "2022-06-30", "y": 198270000000}, {"l": "2023", "x": "2023-06-30", "y": 211915000000}, {"l": "2024", "x": "2024-06-30", "y": 245122000000}, {"l": "2025", "x": "2025-06-30", "y": 281724000000}, {"l": "2026", "x": "2026-06-30", "y": 313108053600, "oy": 313108053600, "e": true, "d": 2026, "g": 11.14, "og": 11.14}, {"l": "2027", "x": "2027-06-30", "y": 347988290771, "oy": 347988290771, "e": true, "d": 2027, "g": 11.14, "og": 11.14}, {"l": "2028", "x": "2028-06-30", "y": 386754186362, "oy": 386754186362, "e": true, "d": 2028, "g": 11.14, "og": 11.14}, {"l": "2029", "x": "2029-06-30", "y": 429838602723, "oy": 429838602723, "e": true, "d": 2029, "g": 11.14, "og": 11.14}, {"l": "2030", "x": "2030-06-30", "y": 477722623067, "oy": 477722623067, "e": true, "d": 2030, "g": 11.14, "og": 11.14}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [{"l": "2016", "x": "2016-06-30", "y": 20539000000}, {"l": "2017", "x": "2017-06-30", "y": 25489000000}, {"l": "2018", "x": "2018-06-30", "y": 16571000000}, {"l": "2019", "x": "2019-06-30", "y": 39240000000}, {"l": "2020", "x": "2020-06-30", "y": 44281000000}, {"l": "2021", "x": "2021-06-30", "y": 61271000000}, {"l": "2022", "x": "2022-06-30", "y": 72738000000}, {"l": "2023", "x": "2023-06-30", "y": 72361000000}, {"l": "2024", "x": "2024-06-30", "y": 88136000000}, {"l": "2025", "x": "2025-06-30", "y": 101832000000}, {"l": "2026", "x": "2026-06-30", "y": 97126118226, "oy": 97126118226, "e": true, "d": 2026, "g": -4.62, "og": -4.62}, {"l": "2027", "x": "2027-06-30", "y": 107945967797, "oy": 107945967797, "e": true, "d": 2027, "g": 11.14, "og": 11.14}, {"l": "2028", "x": "2028-06-30", "y": 119971148609, "oy": 119971148609, "e": true, "d": 2028, "g": 11.14, "og": 11.14}, {"l": "2029", "x": "2029-06-30", "y": 133335934564, "oy": 133335934564, "e": true, "d": 2029, "g": 11.14, "og": 11.14}, {"l": "2030", "x": "2030-06-30", "y": 148189557675, "oy": 148189557675, "e": true, "d": 2030, "g": 11.14, "og": 11.14}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}], "editableDates": {"2026-06-30": 41, "2027-06-30": 42, "2028-06-30": 43, "2029-06-30": 44, "2030-06-30": 45}, "properties": {"display_table": true}, "width": "full"}

Edit Chart Values	2026-06-30	2027-06-30	2028-06-30	2029-06-30	2030-06-30

↳ Growth Rate

Estimated Future Values

Monetary values in USD amounts except #	2025 Jun 30	LTM Jan 17	2026 Jun 30	2027 Jun 30	2028 Jun 30	2029 Jun 30	2030 Jun 30
Revenue	281,724	293,812	313,108	347,988	386,754	429,839	477,723
Revenue Growth Rate	14.93%	4.29%	11.14%	11.14%	11.14%	11.14%	11.14%
Net Income	101,832	104,912	97,126	107,946	119,971	133,336	148,190

Monetary values in USD

amounts except #

2025
Jun 30

LTM
Jan 17

2026
Jun 30

2027
Jun 30

2028
Jun 30

2029
Jun 30

2030
Jun 30

Revenue

281,724

293,812

313,108

347,988

386,754

429,839

477,723

Revenue Growth Rate

14.93%

4.29%

11.14%

Net Income

101,832

104,912

97,126

107,946

119,971

133,336

148,190

Historical Values

Monetary values in USD amounts except #	Average	LTM Jan 17	2025 Jun 30	2024 Jun 30	2023 Jun 30	2022 Jun 30	2021 Jun 30	2020 Jun 30	2019 Jun 30	2018 Jun 30	2017 Jun 30	2016 Jun 30
Revenue	178,716	293,812	281,724	245,122	211,915	198,270	168,088	143,015	125,843	110,360	96,571	91,154
Cost of Revenue	57,168	91,775	87,831	74,114	65,863	62,650	52,232	46,078	42,910	38,353	34,261	32,780
Gross Profit	121,548	202,037	193,893	171,008	146,052	135,620	115,856	96,937	82,933	72,007	62,310	58,374
Gross Margin	67.37%	68.76%	68.82%	69.76%	68.92%	68.4%	68.93%	67.78%	65.9%	65.25%	64.52%	64.04%
Operating Income	72,891	135,937	128,528	109,433	88,523	83,383	69,916	52,959	42,959	35,058	29,025	26,078
Operating Margin	38.51%	46.27%	45.62%	44.64%	41.77%	42.06%	41.59%	37.03%	34.14%	31.77%	30.06%	28.61%
Net Income	58,852	104,912	101,832	88,136	72,361	72,738	61,271	44,281	39,240	16,571	25,489	20,539
Net Margin	31.02%	35.71%	36.15%	35.96%	34.15%	36.69%	36.45%	30.96%	31.18%	15.02%	26.39%	22.53%

Historical Growth Rates

Monetary values in USD amounts except #	Average	LTM Jan 17	2025 Jun 30	2024 Jun 30	2023 Jun 30	2022 Jun 30	2021 Jun 30	2020 Jun 30	2019 Jun 30	2018 Jun 30	2017 Jun 30	2016 Jun 30
Revenue	178,716	293,812	281,724	245,122	211,915	198,270	168,088	143,015	125,843	110,360	96,571	91,154
Revenue Growth Rate	11.14%	4.29%	14.93%	15.67%	6.88%	17.96%	17.53%	13.65%	14.03%	14.28%	5.94%	-2.59%
Net Income	58,852	104,912	101,832	88,136	72,361	72,738	61,271	44,281	39,240	16,571	25,489	20,539
Net Margin	31.02%	35.71%	36.15%	35.96%	34.15%	36.69%	36.45%	30.96%	31.18%	15.02%	26.39%	22.53%
Net Income Growth Rate	27.65%	3.02%	15.54%	21.8%	-0.518%	18.72%	38.37%	12.85%	136.8%	-34.99%	24.1%	68.45%
Stockholders Equity	177,531	363,076	343,479	268,477	206,223	166,542	141,988	118,304	102,330	82,718	87,711	71,997
Equity Growth Rate	15.48%	5.71%	27.94%	30.19%	23.83%	17.29%	20.02%	15.61%	23.71%	-5.69%	21.83%	-10.1%
Return on Invested Capital (ROIC)	20.87%	23.64%	23.66%	24.28%	26.26%	28.32%	26.09%	20.53%	18.75%	8.45%	13.24%	16.37%
After-tax Operating Income	59,623	111,715	105,869	89,482	71,723	72,449	60,249	44,217	38,585	15,928	24,742	20,891
Income Tax Rate	19.59%	17.82%	17.63%	18.23%	18.98%	13.11%	13.83%	16.51%	10.18%	54.57%	14.76%	19.89%
Invested Capital	270,235	472,506	447,543	368,562	273,123	255,827	230,898	215,425	205,780	188,414	186,904	127,601