DCF Studio

    ABBN.SW · EBS · Industrials

    ABB Ltd

    Also onConsensus Drift

    Implied value per share

    CHF 57.32

    Market price

    CHF 80.02

    Implied upside

    -28.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 0.8218

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

    Current EV/EBITDA of 22.5x 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
    CHF 57.32-28.4%
    Exit multiple
    CHF 56.26-29.7%
    Market price
    CHF 80.02

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    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 4.3bnUSD 4.4bnUSD 4.6bnUSD 4.8bnUSD 5.0bn+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 4.3bnUSD 4.5bnUSD 4.7bnUSD 4.9bnUSD 5.1bn+4.1%
    Discount factor0.97250.91990.87010.82300.7784-
    Present valueUSD 4.2bnUSD 4.1bnUSD 4.1bnUSD 4.0bnUSD 3.9bn-1.5%
    Present Value Of The ForecastUSD 20.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate0.50%CHF assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.005Reported 1.008, pulled toward 1.0 (Blume)
    Cost of equity6.03%Risk-free + beta x equity risk premium
    Cost of debt1.02%Interest expense / average total debt
    Market capitalisationUSD 144.9bn94.1% of capital
    Total debtUSD 9.1bn5.9% of capital, book value as a proxy
    Tax rate15.0%Effective, capped at statutory
    WACC5.72%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 69.75

    84% of EV

    Forecast FCFF, final year
    USD 5.1bn
    Capex at depreciation, working capital in reinvestment
    USD 5.1bn
    Less reinvestment at g/ROIC (13.8% of NOPAT)
    USD -708.4m
    Capitalised
    USD 4.4bn
    ROIC (reported)
    18.2%
    Terminal value, undiscounted
    USD 141.1bn
    Terminal value, discounted
    USD 109.9bn
    Enterprise value
    USD 130.2bn
    Less net debt
    USD 2.5bn
    Equity value
    USD 127.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 68.46

    84% of EV

    Terminal value, undiscounted
    USD 138.1bn
    Terminal value, discounted
    USD 107.5bn
    Enterprise value
    USD 127.8bn
    Less net debt
    USD 2.5bn
    Equity value
    USD 125.3bn

    Spread between methods: 2%.

    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%
    3.72%110.12135.82182.43293.25896.55
    4.72%75.9886.12100.78123.91165.86
    5.72%58.0063.0969.7578.8391.96
    6.72%46.8949.8053.3957.9363.86
    7.72%39.3541.1543.2945.8749.04

    Outlined: this model. Green text: above today's price of 97.37. 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%11.5%+7.4pp
    EBIT margin14.5%20.2%+5.8pp
    Discount rate5.7%4.8%-0.9pp
    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.