DCF Studio

    APD · NYQ · Basic Materials

    Air Products and Chemicals, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -30.44

    Market price

    USD 284.18

    Implied upside

    -110.7%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 43.6% of revenue against depreciation of 11.6%. 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.

    Value Per Share

    Perpetuity growth
    USD -30.44-110.7%
    Exit multiple
    USD 101.51-64.3%
    Market price
    USD 284.18

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -1865426610-9327133050FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 11.8bnUSD 11.6bnUSD 11.4bnUSD 11.2bnUSD 11.0bn-1.8%
    EBITUSD 2.6bnUSD 2.6bnUSD 2.5bnUSD 2.5bnUSD 2.5bn-1.8%
    NOPATUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.0bnUSD 2.0bn-1.8%
    Add depreciation & amortisationUSD 1.4bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bn-1.8%
    Less capital expenditureUSD -5.2bnUSD -5.1bnUSD -5.0bnUSD -4.9bnUSD -4.8bn-1.8%
    Less increase in working capitalUSD -212.7mUSD -208.9mUSD -205.2mUSD -201.6mUSD -198.1m-1.8%
    Free cashflow to firmUSD -1.9bnUSD -1.8bnUSD -1.8bnUSD -1.8bnUSD -1.7bn+1.8%
    Discount factor0.96070.88680.81850.75550.6973-
    Present valueUSD -1.8bnUSD -1.6bnUSD -1.5bnUSD -1.3bnUSD -1.2bn+9.3%
    Present Value Of The ForecastUSD -7.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.835Reported 0.754, pulled toward 1.0 (Blume)
    Cost of equity9.59%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 63.3bn77.5% of capital
    Total debtUSD 18.4bn22.5% of capital, book value as a proxy
    Tax rate19.1%Effective, capped at statutory
    WACC8.34%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 -30.44

    176% of EV

    Forecast FCFF, final year
    USD -1.7bn
    Capex at depreciation, working capital in reinvestment
    USD 2.0bn
    Less reinvestment at g/ROIC (30.0% of NOPAT)
    USD -601.9m
    Capitalised
    USD 1.4bn
    ROIC (WACC floor)
    8.3%
    Terminal value, undiscounted
    USD 24.7bn
    Terminal value, discounted
    USD 17.2bn
    Enterprise value
    USD 9.8bn
    Less net debt
    USD 16.6bn
    Equity value
    USD -6.8bn

    Exit at 17.9x EBITDA

    Value per shareUSD 101.51

    119% of EV

    Terminal value, undiscounted
    USD 66.8bn
    Terminal value, discounted
    USD 46.6bn
    Enterprise value
    USD 39.2bn
    Less net debt
    USD 16.6bn
    Equity value
    USD 22.6bn

    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%
    6.34%8.3012.8218.4025.5335.02
    7.34%-15.07-13.36-11.38-9.03-6.17
    8.34%-31.20-30.82-30.44-30.07-29.69
    9.34%-41.46-41.13-40.81-40.49-40.17
    10.34%-49.50-49.22-48.94-48.66-48.38

    Outlined: this model. Green text: above today's price of 284.18. 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 year-1.8%29.9%+31.7pp
    EBIT margin22.3%83.5%+61.2pp
    Discount rate8.3%3.9%-4.5pp
    Download as Excel

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