Calculating the Theoretical Stock Price of a SaaS Company Using DCF: Full Process Disclosure for Money Forward (3994)

What you can do after reading this article

• Extract necessary data from financial statements

• Calculate the theoretical stock price of a SaaS company yourself using the DCF method

• Organize risk factors by upside and downside scenarios

• Compare and verify your own calculations against professional analyst forecasts

This article is for people who:

• Have started buying stocks but are choosing them somewhat aimlessly

• Know terms like DCF and WACC but have never actually performed the calculations

• Are studying finance and want to apply the theory to real companies

• Are considering employment or a career change in the financial industry and want to get a feel for practical corporate analysis

Conversely, this may not be enough for those who can already build their own models.

The subject for this analysis is Money Forward (TSE Prime: 3994), a notable stock that announced a shift to profitability in April 2026.

Why DCF is necessary for analyzing SaaS companies

Common indicators like PER and PBR are based on "current earnings" or "current net assets." These are easy to use for evaluating mature companies with stable profits.

However, SaaS companies have a different structure. They continue to operate at a loss due to upfront investment, and then profits expand rapidly from a certain point. This is the case for Money Forward as well; its stock price remained high despite years of losses. Dismissing this as "overvalued" is a flawed evaluation framework.

The DCF (Discounted Cash Flow) method calculates the stock price by converting "future cash generated" into present value. It can incorporate future growth even if current profits are zero. It is the most suitable method for evaluating SaaS companies.

Earnings Summary | Checking the latest figures

Before starting the DCF calculation, let's organize the current performance. All figures are cited from publicly available documents.

Latest (Q1 of the fiscal year ending November 2026)

Comparison with the Previous Full Fiscal Year (Fiscal Year Ending November 2025)

Company Guidance (Full Fiscal Year Ending November 2026)

Medium- to Long-Term Financial Targets

• FY2028 (Fiscal Year Ending November 2028): Business Segment EBITDA Margin of 30% or higher

• FY2030 (Fiscal Year Ending November 2030): AI-related ARR of 15 billion yen or higher

(Source: Q1 Financial Results Presentation Materials for the Fiscal Year Ending November 2026)
Materials Used

The materials used in this analysis are as follows. All are available for free.

• Q1 Financial Results for the Fiscal Year Ending November 2026 (TDnet or Company IR Page)

• Full-Year Financial Results and Presentation Materials for the Fiscal Year Ending November 2025

• Annual Securities Report (14th Term)

• Beta Value: Investing.com (5-year monthly historical data)

• Analyst Target Stock Prices: Publicly available information from each firm

Step 1 | Calculate Net Cash

In DCF, equity value is determined by adding the 'excess cash on hand' to the 'value generated by the business (business value).' First, we check the difference between cash and debt (net cash).

How to Extract Data

Pick up cash from the 'Current Assets' section and interest-bearing debt from the 'Current Liabilities/Non-current Liabilities' section of the balance sheet.

Money Forward is currently in a net cash (effectively debt-free) state of approximately 32.8 billion yen.

[Practical Note] For more precise calculations, it is common to add purchased receivables (2,280 million yen) to cash equivalents and add lease liabilities (4,773 million yen) to interest-bearing debt. Even so, the net cash remains at the 30 billion yen scale.

Step 2 | Forecasting FCF (Free Cash Flow)

The core of DCF is "discounting future FCF to present value." FCF is the cash that the business actually generates.

FCF Calculation Formula

In the case of a SaaS company, the majority of capital expenditure is software development costs. Money Forward's Q1 software increase was 936 million yen (approximately 3.7 billion yen on an annualized basis).

Using the Company's Mid-term Targets

Money Forward has published mid-term financial targets of "EBITDA of 27 billion yen or more and operating CF of 18 billion yen or more in FY2028." 18÷27 = approximately 67%. In other words, the company itself is saying that "approximately 67% of EBITDA will become operating CF." We will use this as the FCF conversion rate.

Scenario Setting

Step 3 | Calculating WACC (Weighted Average Cost of Capital)

WACC is the "minimum rate of return that investors require from this company." Investments that can only be expected to yield a return lower than this will have a negative NPV (Net Present Value) and destroy value.

The calculation formula uses CAPM (Capital Asset Pricing Model).

What is β: An indicator showing how many percent this stock moves when the overall market moves by 1%. You can check this by searching for the ticker symbol on Investing.com or Yahoo Finance.

WACC Calculation

In the case of a growth company like Money Forward where market capitalization significantly exceeds interest-bearing debt, the market-based equity weight becomes approximately 90% (this is completely different from the book-value equity ratio of 26%).

Step 4 | Calculate Terminal Value

Companies continue their operations even after the DCF forecast period (3 years in this case) ends. The "sum of values from year 3 onwards" is called the Terminal Value (TV).

Setting g (perpetual growth rate): Using Japan's nominal GDP growth rate (1-2%) is a practical benchmark. Using a figure higher than this tends to lead to overvaluation.

Step 5 | Calculate Present Value (PV)

Discount the FCF and Terminal Value using the WACC (7.6%).

Discount factors: 1 year later 0.929 / 2 years later 0.864 / 3 years later 0.803

Neutral Scenario

Bullish Scenario

Bearish Scenario

Step 6 | Calculate Theoretical Stock Price

[Important Note] Approximately 90% (263.3 billion yen) of the 292.7 billion yen business value in the bullish scenario is the Terminal Value. The majority of the DCF conclusion depends on the "growth assumptions from year 3 onwards." This is an inherent limitation of DCF, and it is the same regardless of which company you analyze.

Step 7 | Sensitivity Analysis

Theoretical stock price when the FCF of the neutral scenario is fixed and the WACC and perpetual growth rate are varied:

Changing the WACC by 1% moves the theoretical stock price by 700 to 900 yen. Presenting a single point as the conclusion of "calculating the theoretical stock price with DCF" is not strictly accurate; showing a range like this is a more sincere approach.

Step 8 | Compare with Professional Analyst Forecasts

By comparing your calculation results with analysts' target prices, you can verify the validity of your assumptions.

The DCF estimation range for this analysis (2,900–5,870 yen) largely covers the analysts' forecast range (3,500–6,000 yen).

What is noteworthy is the discrepancy between analysts. There is a 1.7x difference between the most bullish, Macquarie (6,000 yen), and the most bearish, Morgan Stanley (3,500 yen). Note that sell-side analyst reports have a structural bias that makes it difficult to issue strong sell recommendations due to their relationships with the companies they cover. That is precisely why there is value in building your own model to maintain an independent perspective.

Template for Application to Other SaaS Companies

Risk Analysis | Viewing Upside and Downside Factors Equally

Upside Factors

Accelerated Growth in Corporate SaaS ARR for SMBs is up 32% year-on-year, and ARR for mid-sized enterprises is up 42% year-on-year. If this momentum continues, there is a possibility of exceeding the upper end of the FY2026 full-year guidance. (Source: Earnings Presentation Materials, items 10 and 12)

ARPA Improvement via AI Services With the penetration of "Money Forward AI Cowork" and "AI-BPO," there is a possibility that the average revenue per account (ARPA) will rise more than expected. (Source: Earnings Presentation Materials, item 47)

Improvement in Development Efficiency Through the expanded use of AI coding agents, product development costs may decrease more than anticipated. (Source: Earnings Presentation Materials, item 19)

Downside Factors

Slowdown in Cross-selling and ARPA Growth If the adoption of multiple products and the increase in average revenue per account do not proceed as planned, the ARR growth rate will slow down. (Source: Annual Securities Report, page 31)

Goodwill Impairment Risk Goodwill recorded from past M&A activities stood at 6,731 million yen at the end of the fiscal year ending November 2025. If business plans are not met, there is a risk of recording impairment losses. (Source: Annual Securities Report, page 95)

Credit Risk in Factoring Business If the macroeconomy deteriorates, credit risk in the factoring business may increase, potentially leading to bad debt losses. (Source: Annual Securities Report, page 31)

Stock Dilution Risk Existing shareholders' equity may be diluted due to stock option and restricted stock compensation plans. (Source: Annual Securities Report, page 32)

Valuation Loss on Investment Securities There is a risk of recording valuation losses on investment securities, such as unlisted stocks, due to a deterioration in the environment of the investee companies. (Source: Annual Securities Report, page 94)

Investment Decision | Thinking in Three Scenarios

It is inherently dishonest to state definitively whether to "buy or sell" in a single word. Because the conclusion changes depending on the assumptions, I will present three scenarios in parallel.

Bullish Scenario | Theoretical Stock Price: Approx. 5,870 yen (+19% compared to current stock price)

This is the case where Q1 operating profitability and 34% ARR growth continue. It assumes that ARPA will improve through the deployment of AI Cowork and AI-BPO, and that the FY2028 EBITDA target (27 billion yen or more) will be achieved or exceeded.

Conditions for fulfillment: ARR growth rate maintains over 30% for the next two years / EBITDA margin improves quarter by quarter / Unit price contribution from new AI services appears in the figures within FY2026

Neutral Scenario | Theoretical Stock Price: Approx. 4,200 yen (-14% compared to current stock price)

This is the case where ARR expansion continues, but AI investment and recruitment costs increase, leading to a more gradual improvement in profitability. It assumes that approximately 80% of the FY2028 EBITDA target is achieved.

Conditions for fulfillment: ARR growth rate gradually slows to the high 20% range / Profit improvement pace slows due to cost increases / AI business ramp-up takes longer than expected

Bearish Scenario | Theoretical Stock Price: Approx. 2,900 yen (-41% compared to current stock price)

This is the case where, in addition to a slowdown in corporate customer acquisition, goodwill impairment, bad debt from factoring, and valuation losses on investment securities overlap. It assumes that only about 55% of the FY2028 EBITDA target is achieved.

Conditions for fulfillment: ARR growth rate falls below 20% / Multiple one-time losses occur simultaneously / Churn rate of SMB customers rises due to deterioration in the macro environment

Indicators to Monitor

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This article is the first in a series.

Part 2 (Coming Soon): Why do SaaS companies have high stock prices even when they are in the red? I will explain the concept of DCF from scratch. I will answer the question, 'Why do professionals buy stocks that look expensive when viewed through PER?' You can read it without any technical jargon.

Part 3 (Coming Soon): How to Read Financial Results Briefings (Kessan Tanshin) | Putting it into Practice with Money Forward What can you understand by looking at which parts of the financial results briefing? How do you extract the data used this time? I will explain it page by page for those opening a financial results briefing for the first time.

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This article is for informational purposes only and does not recommend the buying or selling of any specific stock. Please make investment decisions at your own risk.