DCF Studio

    ALC.SW · EBS · Healthcare

    Alcon Inc.

    Also onConsensus Drift

    Implied value per share

    CHF 75.61

    Market price

    CHF 53.66

    Implied upside

    +40.9%

    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.

    Value Per Share

    Perpetuity growth
    CHF 75.61+40.9%
    Exit multiple
    CHF 54.70+1.9%
    Market price
    CHF 53.66

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 11.0bnUSD 11.7bnUSD 12.4bnUSD 13.2bnUSD 14.0bn+6.1%
    EBITUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+6.1%
    NOPATUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.4bn+6.1%
    Add depreciation & amortisationUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.8bn+6.1%
    Less capital expenditureUSD -846.2mUSD -897.5mUSD -951.9mUSD -1.0bnUSD -1.1bn+6.1%
    Less increase in working capitalUSD -308.9mUSD -327.7mUSD -347.5mUSD -368.6mUSD -391.0m+6.1%
    Free cashflow to firmUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.7bn+6.1%
    Discount factor0.97670.93160.88870.84770.8086-
    Present valueUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+1.2%
    Present Value Of The ForecastUSD 6.7bn

    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
    Beta0.798Reported 0.698, pulled toward 1.0 (Blume)
    Cost of equity4.89%Risk-free + beta x equity risk premium
    Cost of debt2.50%Implied cost of debt of 40.6% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 25.9bn98.1% of capital
    Total debtUSD 509.0m1.9% of capital, book value as a proxy
    Tax rate15.0%Effective, capped at statutory
    WACC4.83%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 92.01

    86% of EV

    Forecast FCFF, final year
    USD 1.7bn
    Capex at depreciation, working capital in reinvestment
    USD 2.3bn
    Less reinvestment at g/ROIC (51.7% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 1.1bn
    ROIC (WACC floor)
    4.8%
    Terminal value, undiscounted
    USD 48.9bn
    Terminal value, discounted
    USD 39.5bn
    Enterprise value
    USD 46.2bn
    Less net debt
    USD 509.0m
    Equity value
    USD 45.7bn

    Exit at 9.8x EBITDA

    Value per shareUSD 66.56

    80% of EV

    Terminal value, undiscounted
    USD 33.2bn
    Terminal value, discounted
    USD 26.9bn
    Enterprise value
    USD 33.5bn
    Less net debt
    USD 509.0m
    Equity value
    USD 33.0bn

    Spread between methods: 32%.

    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%
    2.83%208.80265.62491.05——
    3.83%119.82122.67127.29136.87173.67
    4.83%91.2391.6292.0192.4092.78
    5.83%74.6774.9875.2875.5975.90
    6.83%62.9963.2463.4963.7564.00

    Outlined: this model. Green text: above today's price of 65.29. 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 year6.1%-2.5%-8.5pp
    EBIT margin11.5%6.2%-5.3pp
    Discount rate4.8%6.7%+1.8pp
    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.