Stock Analysis

Calculating The Intrinsic Value Of monday.com Ltd. (NASDAQ:MNDY)

NasdaqGS:MNDY
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Key Insights

  • The projected fair value for monday.com is US$239 based on 2 Stage Free Cash Flow to Equity
  • monday.com's US$280 share price indicates it is trading at similar levels as its fair value estimate
  • Our fair value estimate is 32% lower than monday.com's analyst price target of US$350

Today we will run through one way of estimating the intrinsic value of monday.com Ltd. (NASDAQ:MNDY) by taking the expected future cash flows and discounting them to their present value. This will be done using the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!

We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

The Model

We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

10-year free cash flow (FCF) estimate

2026202720282029203020312032203320342035
Levered FCF ($, Millions) US$391.9mUS$499.6mUS$633.0mUS$803.6mUS$933.8mUS$1.05bUS$1.15bUS$1.23bUS$1.31bUS$1.38b
Growth Rate Estimate SourceAnalyst x11Analyst x5Analyst x2Analyst x2Est @ 16.19%Est @ 12.21%Est @ 9.43%Est @ 7.48%Est @ 6.12%Est @ 5.17%
Present Value ($, Millions) Discounted @ 10% US$355US$410US$471US$542US$571US$581US$576US$561US$539US$514

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$5.1b

We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.9%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 10%.

Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$1.4b× (1 + 2.9%) ÷ (10%– 2.9%) = US$19b

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$19b÷ ( 1 + 10%)10= US$7.2b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$12b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$280, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

dcf
NasdaqGS:MNDY Discounted Cash Flow July 30th 2025

Important Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at monday.com as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 10%, which is based on a levered beta of 1.146. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

Check out our latest analysis for monday.com

SWOT Analysis for monday.com

Strength
  • Earnings growth over the past year exceeded the industry.
  • Currently debt free.
Weakness
  • No major weaknesses identified for MNDY.
Opportunity
  • Annual earnings are forecast to grow faster than the American market.
  • Good value based on P/S ratio compared to estimated Fair P/S ratio.
Threat
  • Revenue is forecast to grow slower than 20% per year.

Looking Ahead:

Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For monday.com, there are three relevant elements you should explore:

  1. Financial Health: Does MNDY have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Future Earnings: How does MNDY's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

About NasdaqGS:MNDY

monday.com

Develops software applications in the United States, Europe, the Middle East, Africa, the United Kingdom, and internationally.

Flawless balance sheet with solid track record.

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