Zachary-An investor with common sense

In every finance class or my previous blog here , financial analysis starts with the risk-free rate. The risk-free rate is the return you expect when bearing few risks. When I took my finance class in college, the risk-free was the “easiest” number to get during valuation projects. I was taught that we generally use US 10-year government bonds as a long-term, risk-free rate. The action is based on two assumptions: The US central bank can print money anytime if it cannot fulfill its debt obligations. The US government is very unlikely to go into default. I asked my macroeconomic professor a very genuine but seemingly naive question in the class.” : So, the government can do that forever? It is like a perpetual motion machine.” My economic professor, who is a lovely Asian lady but makes you feel like she is the kind of person who cannot find a job after a bachelor, master, and Ph.D. and then became a professor, said very relaxedly, "Yeah, it is just like that." (...

Term: Net Capex: this post refers to the accounting number of capital expenditures less depreciation. R&D: research and development Reinvestment: How much the company put back into the company NOWC: Non-cash current asset-Non debt current liability, the cost the company needs to incur for day-to-day business. FCF: Free cash flow Operating profit Margin: Operating income/Revenue In my previous Oracle valuation here , I concluded that Oracle relies on mergers and acquisitions to grow while spending little on capital expenditure and R&D (research and development) to power internal growth. So, I just use the net capital expenditure/estimated M&A cost to estimate future net capex. However, as shown in Figure 1 below, Oracle’s Capex/revenue ratio doubled in 2022 and again in 2023. And the most recent quarterly report shows it does not plan to stop spending more on capex soon. So, how do I estimate how much Oracle will spend on Capex in the next ten years? In addition,...