I’ll try to refine that part in adding a best case to go with base, good, and bad. I’ll try to look at Arista, NetApp, and maybe a few other companies to try to get a better feel for what a reasonable range for the delta would be between operating margin and cash flow generation.
Here’s a quick tweak of a “best case” with revenue growth slowing fairly gradually and FCF margin starting to more closely approach operating margin.
2017 (Act.) 2018 (project.) 2019 2020 2021 2022 2023
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Revenue (mils)$440 $728 $1,023 $1,432 $1,976 $2,628 $3,417 $4,305 $5,296
Rev. Growth Rate - - - 40.0% 38% 33% 30% 26% 23%
Op. Margin - - 8.0% 11.0% 14.0% 17.0% 18.0% 19.0% 20.0%
FCF % - - 0.75% 5.0% 9.0% **12.9% 14.2% 15.4% 16.5%**
FCF - - $7.70 $70.9 $177 $339 $483 $661 $874
Net Cash - - $597 $668 $846 $1,185 $1,668 $2,330 $3,204
Share Price - - $21.38 $26.00 $40.00 $55.00 **$70.00 $85.00 $95.00**
Share Count (mil's)- - 218 263 274 284 294 304 314
Market Cap (mil's)- - $4,661 $6,838 $10,960 $15,620 $20,580 $25,840 $29,830
Enterprise Value - - $4,063.8 $6,170 $10,114 $14,435 $18,911 $23,510 $26,626
EV/FCF - - 527.8 87.0 56.8 42.6 39.1 35.6 30.5
Y-o-Y FCF Growth - - - 821.2% 150.8% 90.6% 42.6% 36.7% 32.2%