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FSLY (Fastly) Earnings Power Value (EPV) : $-12.69 (As of Sep24)


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What is Fastly Earnings Power Value (EPV)?

As of Sep24, Fastly's earnings power value is $-12.69. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is N/A.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Fastly Earnings Power Value (EPV) Historical Data

The historical data trend for Fastly's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Fastly Earnings Power Value (EPV) Chart

Fastly Annual Data
Trend Dec17 Dec18 Dec19 Dec20 Dec21 Dec22 Dec23
Earnings Power Value (EPV)
Get a 7-Day Free Trial - - - -11.38 -11.64

Fastly Quarterly Data
Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22 Sep22 Dec22 Mar23 Jun23 Sep23 Dec23 Mar24 Jun24 Sep24
Earnings Power Value (EPV) Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -11.42 -11.64 -12.02 -12.45 -12.69

Competitive Comparison of Fastly's Earnings Power Value (EPV)

For the Software - Application subindustry, Fastly's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Fastly's Earnings Power Value (EPV) Distribution in the Software Industry

For the Software industry and Technology sector, Fastly's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Fastly's Earnings Power Value (EPV) falls into.



Fastly Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Fastly's "Earning Power" Calculation:

Average of Last 20 Quarters Last Quarter
Revenue 409.2
DDA 54.2
Operating Margin % -44.31
SGA * 25% 68.1
Tax Rate % 1.23
Maintenance Capex 38.0
Cash and Cash Equivalents 308.2
Short-Term Debt 28.7
Long-Term Debt 385.1
Shares Outstanding (Diluted) 139.2

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = -44.31%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = $409.2 Mil, Average Operating Margin = -44.31%, Average Adjusted SGA = 68.1,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 409.2 * -44.31% +68.1 = $-113.2376809 Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 1.23%, and "Normalized" EBIT = $-113.2376809 Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = -113.2376809 * ( 1 - 1.23% ) = $-111.85051930898 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 54.2 * 0.5 * 1.23% = $0.332275125 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = -111.85051930898 + 0.332275125 = $-111.51824418398 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Fastly's Average Maintenance CAPEX = $38.0 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Fastly's current cash and cash equivalent = $308.2 Mil.
Fastly's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 385.1 + 28.7 = $413.802 Mil.
Fastly's current Shares Outstanding (Diluted Average) = 139.2 Mil.

Fastly's Earnings Power Value (EPV) for Sep24 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( -111.51824418398 - 38.0)/ 9%+308.2-413.802 )/139.2
=-12.69

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -12.687790855717-10.48 )/-12.687790855717
= N/A

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Fastly  (NYSE:FSLY) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Fastly Earnings Power Value (EPV) Related Terms

Thank you for viewing the detailed overview of Fastly's Earnings Power Value (EPV) provided by GuruFocus.com. Please click on the following links to see related term pages.


Fastly Business Description

Industry
Traded in Other Exchanges
Address
475 Brannan Street, Suite 300, San Francisco, CA, USA, 94107
Fastly operates a content delivery network, which is necessary for entities to provide faster and more reliable online content. Fastly's strategy differs from traditional CDNs, which focus on locating servers in as many locations as possible to store copies of files that consumers most use. Fastly is in far fewer sites than traditional CDNs, but it houses servers in the most network-dense data centers. Instead of simply storing static content, it allows its customers to program on its platform, enabling edge computing and better service of the more dynamic content that was traditionally not well served by CDNs. Fastly gears its service to the largest, most sophisticated enterprises rather than small companies and generated nearly three fourths of its revenue in the United States in 2023.
Executives
Ronald W Kisling officer: Chief Financial Officer 2400 BRIDGE PARKWAY, REDWOOD SHORES CA 940651166
Artur Bergman director, 10 percent owner, officer: Chief Executive Officer C/O FASTLY, INC., 475 BRANNAN STREET, SUITE 300, SAN FRANCISCO CA 94107
Todd Nightingale director, officer: CEO C/O FASTLY, INC., 475 BRANNAN SUITE 300, SAN FRANCISCO CA 94107
Richard Devon Daniels director 3005 TASMAN DRIVE, SANTA CLARA CA 95054
Christopher B Paisley director 14870 THREE OAKS COURT, SARATOGA CA 95070
Brett Shirk officer: Chief Revenue Officer 350 ELLIS STREET, MOUNTAIN VIEW CA 94043
David Hornik director, 10 percent owner 2480 SAND HILL ROAD, SUITE 101, MENLO PARK CA 94025
Joshua Bixby officer: President C/O FASTLY, INC., 475 BRANNAN STREET, SUITE 300, SAN FRANCISCO CA 94107
Paul Luongo officer: General Counsel C/O FASTLY, INC., 475 BRANNAN STREET, SUITE 300, SAN FRANCISCO CA 94107
Vanessa C. Smith director C/O FASTLY, 475 BRANNAN STREET, SUITE 300, SAN FRANCISCO CA 94107
Adriel G Lares officer: Chief Financial Officer C/O FASTLY, INC., 475 BRANNAN STREET, SUITE 300, SAN FRANCISCO CA 94107
Charles J Meyers director 301 VELOCITY WAY, 5TH FLOOR, FOSTER CITY CA 94404
Paula Loop director C/O ROBINHOOD MARKETS, INC., 85 WILLOW ROAD, MENLO PARK CA 94025
Abdiel Qualified Master Fund Lp 10 percent owner 90 PARK AVENUE, 29TH FLOOR, NEW YORK NY 10016
Abdiel Capital Lp 10 percent owner C/O ABDIEL CAPITAL ADVISORS, LP, 90 PARK AVENUE, 29TH FLOOR, NEW YORK NY 10016