DCF Studio

    AV.L · LSE · Financial Services

    Aviva plc

    Also onConsensus Drift

    Implied value per share

    GBp -541.19

    Market price

    GBp 712.40

    Implied upside

    -176.0%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedOnly 3 year(s) of history available to anchor assumptions on.
    AdjustedReported capital expenditure averages just 0.54% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.5%. 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.
    NoteNo analyst revenue estimates available, so the consensus scenario is unavailable.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp -541.19-176.0%
    Exit multiple
    GBp -980.51-237.6%
    Market price
    GBp 712.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    -19974443816-99872219080FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 68.4bnGBP 81.5bnGBP 97.2bnGBP 115.8bnGBP 137.9bn+19.2%
    EBITGBP 2.0bnGBP 2.3bnGBP 2.8bnGBP 3.3bnGBP 3.9bn+19.2%
    NOPATGBP 1.5bnGBP 1.7bnGBP 2.1bnGBP 2.5bnGBP 3.0bn+19.2%
    Add depreciation & amortisationGBP 308.6mGBP 367.7mGBP 438.1mGBP 522.0mGBP 622.0m+19.2%
    Less capital expenditureGBP -684.4mGBP -815.4mGBP -971.6mGBP -1.2bnGBP -1.4bn+19.2%
    Less increase in working capitalGBP -11.0bnGBP -13.1bnGBP -15.6bnGBP -18.6bnGBP -22.2bn+19.2%
    Free cashflow to firmGBP -9.9bnGBP -11.8bnGBP -14.1bnGBP -16.8bnGBP -20.0bn-19.2%
    Discount factor0.96470.89790.83560.77770.7238-
    Present valueGBP -9.6bnGBP -10.6bnGBP -11.8bnGBP -13.0bnGBP -14.5bn-10.9%
    Present Value Of The ForecastGBP -59.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.751Reported 0.628, pulled toward 1.0 (Blume)
    Cost of equity8.63%Risk-free + beta x equity risk premium
    Cost of debt5.33%Interest expense / average total debt
    Market capitalisationGBP 21.3bn74.5% of capital
    Total debtGBP 7.3bn25.5% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC7.45%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 shareGBP -5.41

    -121% of EV

    Forecast FCFF, final year
    GBP -20.0bn
    Capex at depreciation, working capital in reinvestment
    GBP 3.3bn
    Less reinvestment at g/ROIC (33.6% of NOPAT)
    GBP -1.1bn
    Capitalised
    GBP 2.2bn
    ROIC (WACC floor)
    7.4%
    Terminal value, undiscounted
    GBP 44.9bn
    Terminal value, discounted
    GBP 32.5bn
    Enterprise value
    GBP -26.9bn
    Less net debt
    GBP -11.2bn
    Equity value
    GBP -15.7bn

    Exit at 6.0x EBITDA

    Value per shareGBP -9.81

    -50% of EV

    Terminal value, undiscounted
    GBP 27.4bn
    Terminal value, discounted
    GBP 19.8bn
    Enterprise value
    GBP -39.6bn
    Less net debt
    GBP -11.2bn
    Equity value
    GBP -28.4bn

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.45%-0.440.030.631.452.66
    6.45%-3.77-3.70-3.64-3.57-3.51
    7.45%-5.52-5.47-5.41-5.36-5.30
    8.45%-6.73-6.69-6.64-6.59-6.55
    9.45%-7.58-7.54-7.50-7.46-7.42

    Outlined: this model. Green text: above today's price of 7.12. 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 year19.2%4.5%-14.6pp
    EBIT margin2.9%5.6%+2.7pp
    Discount rate7.4%4.7%-2.7pp
    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.