DCF Studio

    ATO · NYQ · Utilities

    Atmos Energy Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -10.40

    Market price

    USD 160.30

    Implied upside

    -106.5%

    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 67.5% of revenue against depreciation of 14.6%. 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 -10.40-106.5%
    Exit multiple
    USD 79.10-50.7%
    Market price
    USD 160.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -1430187879-7150939390FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.9bnUSD 5.1bnUSD 5.3bnUSD 5.5bnUSD 5.7bn+3.8%
    EBITUSD 1.4bnUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bn+3.8%
    NOPATUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+3.8%
    Add depreciation & amortisationUSD 715.2mUSD 742.6mUSD 771.0mUSD 800.5mUSD 831.2m+3.8%
    Less capital expenditureUSD -3.3bnUSD -3.4bnUSD -3.6bnUSD -3.7bnUSD -3.8bn+3.8%
    Less increase in working capitalUSD 161.7mUSD 167.9mUSD 174.3mUSD 181.0mUSD 187.9m-3.8%
    Free cashflow to firmUSD -1.2bnUSD -1.3bnUSD -1.3bnUSD -1.4bnUSD -1.4bn-3.8%
    Discount factor0.96310.89340.82870.76870.7130-
    Present valueUSD -1.2bnUSD -1.1bnUSD -1.1bnUSD -1.1bnUSD -1.0bn+3.7%
    Present Value Of The ForecastUSD -5.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.728Reported 0.594, pulled toward 1.0 (Blume)
    Cost of equity9.00%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 27.1bn74.4% of capital
    Total debtUSD 9.3bn25.6% of capital, book value as a proxy
    Tax rate13.5%Effective, capped at statutory
    WACC7.81%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 -10.40

    174% of EV

    Forecast FCFF, final year
    USD -1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (32.0% of NOPAT)
    USD -442.5m
    Capitalised
    USD 939.1m
    ROIC (WACC floor)
    7.8%
    Terminal value, undiscounted
    USD 18.1bn
    Terminal value, discounted
    USD 12.9bn
    Enterprise value
    USD 7.4bn
    Less net debt
    USD 9.1bn
    Equity value
    USD -1.7bn

    Exit at 15.8x EBITDA

    Value per shareUSD 79.10

    125% of EV

    Terminal value, undiscounted
    USD 38.3bn
    Terminal value, discounted
    USD 27.3bn
    Enterprise value
    USD 21.8bn
    Less net debt
    USD 9.1bn
    Equity value
    USD 12.7bn

    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%
    5.81%24.1224.7025.2725.8526.42
    6.81%3.674.144.615.085.55
    7.81%-11.18-10.79-10.40-10.01-9.61
    8.81%-22.37-22.03-21.70-21.36-21.03
    9.81%-31.01-30.73-30.44-30.15-29.86

    Outlined: this model. Green text: above today's price of 160.30. 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 year3.8%29.1%+25.3pp
    EBIT margin28.1%70.4%+42.3pp
    Discount rate7.8%4.1%-3.7pp
    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.