Discounted cash flow
Every line of the free cash flow build is visible and every driver is editable per year. The terminal value is computed both ways, and each method shows what the other one implies, so you can see when the exit multiple and the growth assumption disagree.
Assumptions
Base year
Discounting
Terminal value
Bridge to equity
Debt, cash, minority interest, preferred equity, non-operating assets and the share count are edited directly on the valuation bridge, beside the subtotals they move.
Model
Versus the market
Enter a price, or load a company from filings and fetch one, to see the premium or discount to this valuation.
Bear to bull runs $19.52 to $32.21 around a base of $25.24, so the high uncertainty rating asks for 40% off. A wider range means less is known, and more room is needed before buying.
- Terminal growth of 2.5% implies a return on new capital of 103%, against a WACC of 9%. Growth is not being paid for by reinvestment, so the terminal value is likely too high. Reinvestment needed = g / RONIC: raise final year capex or working capital, or lower terminal growth.
Forecast
| Line item | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|
| Drivers | |||||
| Revenue growth | |||||
| EBIT margin | |||||
| D&A | |||||
| Capex | |||||
| Net working capital | |||||
| Free cash flow build | |||||
| Revenue | $1,080M | $1,156M | $1,225M | $1,286M | $1,338M |
| Revenue growth | 8.00% | 7.00% | 6.00% | 5.00% | 4.00% |
| EBITWorking, Y1: $1,080M x EBIT margin = $194M | $194M | $208M | $233M | $244M | $268M |
| EBIT margin | 18.00% | 18.00% | 19.00% | 19.00% | 20.00% |
| Less: taxes on EBITWorking, Y1: never below zero; losses carry forward to shelter later EBIT | ($41M) | ($44M) | ($49M) | ($51M) | ($56M) |
| NOPATWorking, Y1: EBIT less taxes on EBIT | $154M | $164M | $184M | $193M | $211M |
| Plus: D&A | $54M | $58M | $61M | $64M | $67M |
| Less: capex | ($65M) | ($69M) | ($67M) | ($71M) | ($67M) |
| Less: change in NWC | ($8M) | ($8M) | ($7M) | ($6M) | ($5M) |
| Unlevered free cash flowWorking, Y1: $154M + $54M - $65M - $8M = $135M | $135M | $145M | $171M | $181M | $206M |
| Discount period | 0.500 | 1.500 | 2.500 | 3.500 | 4.500 |
| Discount factor | 0.9578 | 0.8787 | 0.8062 | 0.7396 | 0.6785 |
| Present value of FCF | $129M | $128M | $138M | $134M | $140M |
Valuation bridge
| PV of forecast FCF | $668M |
|---|---|
| Terminal value | $3,252M |
| PV of terminal value | $2,206M |
| Terminal value share of EV | 76.77% |
| Implied return on new capital | 102.70% |
| Enterprise value | $2,874M |
| Less: total debt | |
| Plus: cash and equivalents | |
| Less: minority interest | |
| Less: preferred equityFilled only where the filer tagged it. Check the balance sheet. | |
| Plus: non-operating assetsEquity method investments, JVs, surplus land. Never filled automatically. | |
| Equity value | $2,524M |
| Diluted shares | |
| Value per share | $25.24 |
| Implied exit multiple | 10.15x |
Sensitivity
| WACC downTerminal growth across | 1.50% | 2.00% | 2.50% | 3.00% | 3.50% |
|---|---|---|---|---|---|
| 8.00% | $26.11 | $28.13 | $30.52 | $33.38 | $36.88 |
| 8.50% | $23.97 | $25.67 | $27.66 | $30.01 | $32.83 |
| 9.00% | $22.11 | $23.57 | $25.24 base case | $27.20 | $29.51 |
| 9.50% | $20.49 | $21.74 | $23.17 | $24.82 | $26.74 |
| 10.00% | $19.06 | $20.15 | $21.38 | $22.78 | $24.41 |
Blank cells are combinations where terminal growth meets or exceeds the discount rate, which has no finite value. The grid runs the perpetuity method, matching the headline.