DCF Studio

    ADM.L · LSE · Financial Services

    Admiral Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 10831.04

    Market price

    GBp 3818.00

    Implied upside

    +183.7%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedCapital expenditure runs at 2.5% of revenue against depreciation of 1.6%. 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: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 10831.04+183.7%
    Exit multiple
    GBp 7032.58+84.2%
    Market price
    GBp 3818.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 6.0bnGBP 7.1bnGBP 8.4bnGBP 9.9bnGBP 11.8bn+18.4%
    EBITGBP 912.2mGBP 1.1bnGBP 1.3bnGBP 1.5bnGBP 1.8bn+18.4%
    NOPATGBP 713.7mGBP 845.0mGBP 1.0bnGBP 1.2bnGBP 1.4bn+18.4%
    Add depreciation & amortisationGBP 96.1mGBP 113.7mGBP 134.7mGBP 159.4mGBP 188.7m+18.4%
    Less capital expenditureGBP -148.6mGBP -175.9mGBP -208.2mGBP -246.5mGBP -291.8m+18.4%
    Less increase in working capitalGBP 349.7mGBP 414.0mGBP 490.1mGBP 580.2mGBP 686.9m-18.4%
    Free cashflow to firmGBP 1.0bnGBP 1.2bnGBP 1.4bnGBP 1.7bnGBP 2.0bn+18.4%
    Discount factor0.96880.90930.85350.80110.7519-
    Present valueGBP 979.4mGBP 1.1bnGBP 1.2bnGBP 1.3bnGBP 1.5bn+11.1%
    Present Value Of The ForecastGBP 6.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.462Reported 0.197, pulled toward 1.0 (Blume)
    Cost of equity7.04%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 11.4bn85.8% of capital
    Total debtGBP 1.9bn14.2% of capital, book value as a proxy
    Tax rate21.8%Effective, capped at statutory
    WACC6.54%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 shareGBP 108.31

    80% of EV

    Forecast FCFF, final year
    GBP 2.0bn
    Capex at depreciation, working capital in reinvestment
    GBP 1.5bn
    Less reinvestment at g/ROIC (12.7% of NOPAT)
    GBP -191.6m
    Capitalised
    GBP 1.3bn
    ROIC (reported)
    19.7%
    Terminal value, undiscounted
    GBP 33.4bn
    Terminal value, discounted
    GBP 25.1bn
    Enterprise value
    GBP 31.2bn
    Less net debt
    GBP -2.1bn
    Equity value
    GBP 33.3bn

    Exit at 9.0x EBITDA

    Value per shareGBP 70.33

    69% of EV

    Terminal value, undiscounted
    GBP 17.9bn
    Terminal value, discounted
    GBP 13.4bn
    Enterprise value
    GBP 19.5bn
    Less net debt
    GBP -2.1bn
    Equity value
    GBP 21.6bn

    Spread between methods: 43%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.54%151.55172.55203.78255.20355.89
    5.54%116.45126.74140.39159.36187.58
    6.54%95.24101.07108.31117.57129.84
    7.54%81.0384.6388.9194.13100.61
    8.54%70.8473.1975.9179.1182.92

    Outlined: this model. Green text: above today's price of 38.18. 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 year18.4%-5.7%-24.1pp
    EBIT margin15.2%3.4%-11.9pp
    Discount rate6.5%16.5%+10.0pp
    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.