For example, analysts now estimate that in 2022 sales will rise by 20% from $2.51 billion in 2021 to $3.02 billion. However, let’s take another look at its valuation using the FCF margin concept. That is one reason why I feel that RBLX is probably close to a full valuation. The fact is a 1% FCF yield is a very high metric. This is seen by dividing $568 million by $55.43 billion. Since RBLX stock has a market value of $55.43 billion, this means that it has a FCF yield of 1%. For example, if Roblox keeps generating $142 million in FCF over the next four quarters, it will have an annual FCF production of $568 million. One way to estimate its value is to use the run rate FCF and divide this by the market cap. Moreover, it would be normal for the Christmas season to have a higher FCF margin.īut more important than anything, we can now reliably use the $142 million FCF and the 37% average FCF margin to estimate the value of RBLX stock. However, even though Roblox’s FCF margin fell from 38% in Q4 to 36.7% in Q1, the fact is these are very high levels. In fact, last quarter its FCF was just $127.4 million, so the FCF grew by 11.5% quarter over quarter. It essentially means that the gaming company is extremely profitable and is a cash cow. This is a very high margin and many companies, including typically profitable software companies, would love to have this high a FCF margin. That represents 36.7% of its total revenue. But more importantly, Roblox produced $142.1 million in FCF during Q1. For example, sales were up 140% to $387 million, and 15.4% higher than the prior quarter’s $335.2 million.
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