DCF Studio

    ALLE · NYQ · Industrials

    Allegion plc

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 125.98

    Market price

    USD 152.28

    Implied upside

    -17.3%

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

    Value Per Share

    Perpetuity growth
    USD 125.98-17.3%
    Exit multiple
    USD 175.64+15.3%
    Market price
    USD 152.28

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.4bnUSD 4.7bnUSD 5.1bnUSD 5.4bnUSD 5.8bn+7.5%
    EBITUSD 867.7mUSD 932.9mUSD 1.0bnUSD 1.1bnUSD 1.2bn+7.5%
    NOPATUSD 750.9mUSD 807.4mUSD 868.2mUSD 933.5mUSD 1.0bn+7.5%
    Add depreciation & amortisationUSD 136.4mUSD 146.7mUSD 157.7mUSD 169.6mUSD 182.4m+7.5%
    Less capital expenditureUSD -99.7mUSD -107.2mUSD -115.2mUSD -123.9mUSD -133.2m+7.5%
    Less increase in working capitalUSD -19.9mUSD -21.4mUSD -23.0mUSD -24.7mUSD -26.6m+7.5%
    Free cashflow to firmUSD 767.8mUSD 825.5mUSD 887.7mUSD 954.4mUSD 1.0bn+7.5%
    Discount factor0.95700.87660.80290.73540.6735-
    Present valueUSD 734.8mUSD 723.6mUSD 712.7mUSD 701.8mUSD 691.2m-1.5%
    Present Value Of The ForecastUSD 3.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.893Reported 0.841, pulled toward 1.0 (Blume)
    Cost of equity9.91%Risk-free + beta x equity risk premium
    Cost of debt5.08%Interest expense / average total debt
    Market capitalisationUSD 12.9bn86.7% of capital
    Total debtUSD 2.0bn13.3% of capital, book value as a proxy
    Tax rate13.5%Effective, capped at statutory
    WACC9.18%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 125.98

    72% of EV

    Forecast FCFF, final year
    USD 1.0bn
    Capex at depreciation, working capital in reinvestment
    USD 1.0bn
    Less reinvestment at g/ROIC (13.5% of NOPAT)
    USD -135.8m
    Capitalised
    USD 867.9m
    ROIC (reported)
    18.5%
    Terminal value, undiscounted
    USD 13.3bn
    Terminal value, discounted
    USD 9.0bn
    Enterprise value
    USD 12.5bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 10.9bn

    Exit at 14.7x EBITDA

    Value per shareUSD 175.64

    79% of EV

    Terminal value, undiscounted
    USD 19.7bn
    Terminal value, discounted
    USD 13.3bn
    Enterprise value
    USD 16.8bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 15.2bn

    Spread between methods: 33%.

    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%
    7.18%163.63173.31185.01199.45217.75
    8.18%136.95143.11150.32158.87169.21
    9.18%117.20121.30125.98131.39137.71
    10.18%101.99104.81107.96111.53115.60
    11.18%89.9291.9094.0796.4999.20

    Outlined: this model. Green text: above today's price of 152.28. 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 year7.5%11.7%+4.2pp
    EBIT margin19.8%23.5%+3.6pp
    Discount rate9.2%8.1%-1.1pp
    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.