On the four Ms, Gen Digital earns 65 for management and 70 for moat. The management score rests on a return on invested capital of 10.6% and a gross margin of 78.5% — figures that describe a business earning a respectable return on what it employs. The balance sheet carries debt at 3.16x equity, which magnifies both the returns above and the risk beneath them.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 14.4% a year, the rate measured from the filings. The exit multiple assumed is 25.4x. That produces an intrinsic value of $41.51, a 10-CAP price of $25.78 and a payback time price of $39.62, with the value zone set at the highest of the three, $39.62. Today's price of $22.25 sits inside that zone.
The price sits inside the value zone, but the business scores 70 for moat and 65 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $22.25 |
| Market cap | $13.3B |
| P/E ratio | 12.9x |
| Return on invested capital | 10.6% |
| Gross margin | 78.5% |
| Debt to equity | 3.16x |
| Free cash flow yield | 13.2% |
| Growth rate used | 14.4% |
| Growth rate measured | 14.0% |
| Exit multiple assumed | 25.4x |
| Company | Moat | Buy price |
| GoDaddy (GDDY) | 78 | $152.37 |
| Akamai Technologies (AKAM) | 51 | $58.78 |
| Toast Inc-Class A (TOST) | 87 | $15.88 |
| Qualys, Inc. (QLYS) | 99 | $128.95 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Gen Digital rather than accepting ours.