DCF Studio

    ADI · NMS · Technology

    Analog Devices, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 64.96

    Market price

    USD 375.72

    Implied upside

    -82.7%

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

    Current EV/EBITDA of 37.4x 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
    USD 64.96-82.7%
    Exit multiple
    USD 133.97-64.3%
    Market price
    USD 375.72

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.7bnUSD 10.4bnUSD 10.1bnUSD 9.8bnUSD 9.5bn-2.8%
    EBITUSD 3.0bnUSD 2.9bnUSD 2.8bnUSD 2.7bnUSD 2.7bn-2.8%
    NOPATUSD 2.7bnUSD 2.6bnUSD 2.5bnUSD 2.5bnUSD 2.4bn-2.8%
    Add depreciation & amortisationUSD 2.1bnUSD 2.0bnUSD 2.0bnUSD 1.9bnUSD 1.9bn-2.8%
    Less capital expenditureUSD -767.2mUSD -745.4mUSD -724.3mUSD -703.7mUSD -683.7m-2.8%
    Less increase in working capitalUSD 21.2mUSD 20.6mUSD 20.0mUSD 19.4mUSD 18.9m+2.8%
    Free cashflow to firmUSD 4.0bnUSD 3.9bnUSD 3.8bnUSD 3.7bnUSD 3.6bn-2.8%
    Discount factor0.94940.85570.77130.69520.6266-
    Present valueUSD 3.8bnUSD 3.4bnUSD 2.9bnUSD 2.6bnUSD 2.3bn-12.4%
    Present Value Of The ForecastUSD 14.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.137Reported 1.205, pulled toward 1.0 (Blume)
    Cost of equity11.25%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 182.1bn95.5% of capital
    Total debtUSD 8.7bn4.5% of capital, book value as a proxy
    Tax rate9.7%Effective, capped at statutory
    WACC10.95%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 64.96

    60% of EV

    Forecast FCFF, final year
    USD 3.6bn
    Capex at depreciation, working capital in reinvestment
    USD 3.8bn
    Less reinvestment at g/ROIC (22.8% of NOPAT)
    USD -869.4m
    Capitalised
    USD 2.9bn
    ROIC (WACC floor)
    10.9%
    Terminal value, undiscounted
    USD 35.6bn
    Terminal value, discounted
    USD 22.3bn
    Enterprise value
    USD 37.3bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 32.3bn

    Exit at 20.0x EBITDA

    Value per shareUSD 133.97

    79% of EV

    Terminal value, undiscounted
    USD 90.4bn
    Terminal value, discounted
    USD 56.6bn
    Enterprise value
    USD 71.6bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 66.5bn

    Spread between methods: 69%.

    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%
    8.95%80.3880.6780.9681.2681.55
    9.95%71.6571.9172.1672.4172.66
    10.95%64.5264.7464.9665.1865.40
    11.95%58.5958.7858.9759.1659.36
    12.95%53.5753.7453.9154.0854.25

    Outlined: this model. Green text: above today's price of 375.72. 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-2.8%41.5%+44.3pp
    Discount rate10.9%3.7%-7.2pp
    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.