DCF Studio

    A2A.MI · MIL · Utilities

    A2A S.p.A.

    Also onConsensus Drift

    Implied value per share

    EUR -0.76

    Market price

    EUR 2.32

    Implied upside

    -132.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 9.8% of revenue against depreciation of 5.7%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR -0.76-132.7%
    Exit multiple
    EUR -1.12-148.3%
    Market price
    EUR 2.32

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    -446346471-2231732360FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 11.6bnEUR 9.8bnEUR 8.2bnEUR 6.9bnEUR 5.8bn-15.7%
    EBITEUR 748.3mEUR 630.8mEUR 531.7mEUR 448.2mEUR 377.8m-15.7%
    NOPATEUR 561.2mEUR 473.1mEUR 398.8mEUR 336.1mEUR 283.3m-15.7%
    Add depreciation & amortisationEUR 656.3mEUR 553.2mEUR 466.3mEUR 393.1mEUR 331.4m-15.7%
    Less capital expenditureEUR -1.1bnEUR -955.8mEUR -805.7mEUR -679.2mEUR -572.5m-15.7%
    Less increase in working capitalEUR -529.9mEUR -446.7mEUR -376.5mEUR -317.4mEUR -267.5m-15.7%
    Free cashflow to firmEUR -446.3mEUR -376.2mEUR -317.2mEUR -267.3mEUR -225.4m+15.7%
    Discount factor0.96910.91010.85470.80270.7539-
    Present valueEUR -432.6mEUR -342.4mEUR -271.1mEUR -214.6mEUR -169.9m+20.8%
    Present Value Of The ForecastEUR -1.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.863Reported 0.796, pulled toward 1.0 (Blume)
    Cost of equity9.81%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 7.3bn50.0% of capital
    Total debtEUR 7.3bn50.0% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC6.48%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareEUR -0.76

    148% of EV

    Forecast FCFF, final year
    EUR -225.4m
    Capex at depreciation, working capital in reinvestment
    EUR 370.0m
    Less reinvestment at g/ROIC (38.6% of NOPAT)
    EUR -142.8m
    Capitalised
    EUR 227.3m
    ROIC (WACC floor)
    6.5%
    Terminal value, undiscounted
    EUR 5.9bn
    Terminal value, discounted
    EUR 4.4bn
    Enterprise value
    EUR 3.0bn
    Less net debt
    EUR 5.4bn
    Equity value
    EUR -2.4bn

    Exit at 6.1x EBITDA

    Value per shareEUR -1.12

    177% of EV

    Terminal value, undiscounted
    EUR 4.4bn
    Terminal value, discounted
    EUR 3.3bn
    Enterprise value
    EUR 1.9bn
    Less net debt
    EUR 5.4bn
    Equity value
    EUR -3.5bn

    Sensitivity

    Value per share (EUR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.48%0.330.530.831.332.34
    5.48%-0.37-0.32-0.26-0.17-0.03
    6.48%-0.77-0.77-0.76-0.75-0.75
    7.48%-1.00-0.99-0.99-0.98-0.98
    8.48%-1.17-1.17-1.16-1.16-1.15

    Outlined: this model. Green text: above today's price of 2.32. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-15.7%2.6%+18.3pp
    EBIT margin6.5%18.5%+12.0pp
    Discount rate6.5%3.9%-2.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.