DCF Studio

    AES · NYQ · Utilities

    The AES Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -28.52

    Market price

    USD 14.83

    Implied upside

    -292.3%

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

    AdjustedConsensus rests on as few as 1 analyst estimate(s).
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 51.4% of revenue against depreciation of 9.9%. 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.

    Value Per Share

    Perpetuity growth
    USD -28.52-292.3%
    Exit multiple
    USD -20.89-240.8%
    Market price
    USD 14.83

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -3405129775-17025648880FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 12.1bnUSD 12.0bnUSD 11.9bnUSD 11.7bnUSD 11.6bn-1.0%
    EBITUSD 2.1bnUSD 2.1bnUSD 2.0bnUSD 2.0bnUSD 2.0bn-1.0%
    NOPATUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bn-1.0%
    Add depreciation & amortisationUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.2bn-1.0%
    Less capital expenditureUSD -6.2bnUSD -6.2bnUSD -6.1bnUSD -6.0bnUSD -6.0bn-1.0%
    Less increase in working capitalUSD -29.6mUSD -29.3mUSD -29.0mUSD -28.7mUSD -28.4m-1.0%
    Free cashflow to firmUSD -3.4bnUSD -3.4bnUSD -3.3bnUSD -3.3bnUSD -3.3bn+1.0%
    Discount factor0.97310.92140.87240.82600.7821-
    Present valueUSD -3.3bnUSD -3.1bnUSD -2.9bnUSD -2.7bnUSD -2.6bn+6.3%
    Present Value Of The ForecastUSD -14.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.966Reported 0.950, pulled toward 1.0 (Blume)
    Cost of equity10.31%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 10.6bn26.1% of capital
    Total debtUSD 29.9bn73.9% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC5.61%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 -28.52

    283% of EV

    Forecast FCFF, final year
    USD -3.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.6bn
    Less reinvestment at g/ROIC (44.5% of NOPAT)
    USD -704.4m
    Capitalised
    USD 876.9m
    ROIC (WACC floor)
    5.6%
    Terminal value, undiscounted
    USD 28.9bn
    Terminal value, discounted
    USD 22.6bn
    Enterprise value
    USD 8.0bn
    Less net debt
    USD 28.3bn
    Equity value
    USD -20.4bn

    Exit at 11.4x EBITDA

    Value per shareUSD -20.89

    209% of EV

    Terminal value, undiscounted
    USD 35.8bn
    Terminal value, discounted
    USD 28.0bn
    Enterprise value
    USD 13.4bn
    Less net debt
    USD 28.3bn
    Equity value
    USD -14.9bn

    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%
    3.61%5.1515.4034.7085.26584.94
    4.61%-17.56-15.40-12.31-7.391.79
    5.61%-28.83-28.67-28.52-28.37-28.21
    6.61%-34.22-34.09-33.97-33.84-33.72
    7.61%-38.05-37.94-37.84-37.73-37.63

    Outlined: this model. Green text: above today's price of 14.83. 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-1.0%21.1%+22.1pp
    EBIT margin17.2%35.2%+18.0pp
    Discount rate5.6%3.9%-1.7pp
    Download as Excel

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