DCF Studio

    ABB.ST · STO · Industrials

    ABB Ltd

    Also onConsensus Drift

    Implied value per share

    SEK 242.24

    Market price

    SEK 962.60

    Implied upside

    -74.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 9.8288

    AdjustedReports in USD, trades in SEK. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Current EV/EBITDA of 266.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    SEK 242.24-74.8%
    Exit multiple
    SEK 544.18-43.5%
    Market price
    SEK 962.60

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 34.6bnUSD 36.0bnUSD 37.5bnUSD 39.0bnUSD 40.6bn+4.1%
    EBITUSD 5.0bnUSD 5.2bnUSD 5.4bnUSD 5.6bnUSD 5.9bn+4.1%
    NOPATUSD 3.8bnUSD 4.0bnUSD 4.2bnUSD 4.3bnUSD 4.5bn+4.1%
    Add depreciation & amortisationUSD 874.9mUSD 910.8mUSD 948.2mUSD 987.1mUSD 1.0bn+4.1%
    Less capital expenditureUSD -916.6mUSD -954.2mUSD -993.4mUSD -1.0bnUSD -1.1bn+4.1%
    Less increase in working capitalUSD 98.2mUSD 102.2mUSD 106.4mUSD 110.7mUSD 115.3m-4.1%
    Free cashflow to firmUSD 3.9bnUSD 4.1bnUSD 4.2bnUSD 4.4bnUSD 4.6bn+4.1%
    Discount factor0.95050.85860.77570.70070.6330-
    Present valueUSD 3.7bnUSD 3.5bnUSD 3.3bnUSD 3.1bnUSD 2.9bn-6.0%
    Present Value Of The ForecastUSD 16.4bn

    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
    Beta1.005Reported 1.008, pulled toward 1.0 (Blume)
    Cost of equity10.73%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 1743.0bn99.5% of capital
    Total debtUSD 9.1bn0.5% of capital, book value as a proxy
    Tax rate23.3%Effective, capped at statutory
    WACC10.70%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 shareUSD 24.65

    65% of EV

    Forecast FCFF, final year
    USD 4.6bn
    Capex at depreciation, working capital in reinvestment
    USD 4.6bn
    Less reinvestment at g/ROIC (15.2% of NOPAT)
    USD -708.4m
    Capitalised
    USD 3.9bn
    ROIC (reported)
    16.4%
    Terminal value, undiscounted
    USD 49.2bn
    Terminal value, discounted
    USD 31.2bn
    Enterprise value
    USD 47.6bn
    Less net debt
    USD 2.5bn
    Equity value
    USD 45.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 55.37

    84% of EV

    Terminal value, undiscounted
    USD 138.1bn
    Terminal value, discounted
    USD 87.4bn
    Enterprise value
    USD 103.8bn
    Less net debt
    USD 2.5bn
    Equity value
    USD 101.4bn

    Spread between methods: 77%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.70%30.3631.3432.4733.7835.34
    9.70%26.6427.2928.0228.8529.80
    10.70%23.7324.1624.6525.1825.79
    11.70%21.3821.6822.0022.3622.75
    12.70%19.4619.6619.8820.1120.37

    Outlined: this model. Green text: above today's price of 97.94. 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 year4.1%39.4%+35.3pp
    EBIT margin14.5%56.3%+41.8pp
    Discount rate10.7%4.5%-6.2pp
    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.