DCF Studio

    BA.L · LSE · Industrials

    BAE Systems plc

    Also onConsensus Drift

    Implied value per share

    GBp 2872.59

    Market price

    GBp 2025.00

    Implied upside

    +41.9%

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

    AdjustedBeta of -0.057 is not usable in a cost of equity. Clamped to 0.30.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 2872.59+41.9%
    Exit multiple
    GBp 3010.23+48.7%
    Market price
    GBp 2025.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 31.2bnGBP 34.3bnGBP 37.8bnGBP 41.6bnGBP 45.7bn+10.1%
    EBITGBP 3.0bnGBP 3.3bnGBP 3.7bnGBP 4.0bnGBP 4.4bn+10.1%
    NOPATGBP 2.5bnGBP 2.8bnGBP 3.1bnGBP 3.4bnGBP 3.7bn+10.1%
    Add depreciation & amortisationGBP 1.2bnGBP 1.3bnGBP 1.4bnGBP 1.6bnGBP 1.7bn+10.1%
    Less capital expenditureGBP -1.2bnGBP -1.3bnGBP -1.5bnGBP -1.6bnGBP -1.8bn+10.1%
    Less increase in working capitalGBP 656.3mGBP 722.3mGBP 794.9mGBP 874.8mGBP 962.7m-10.1%
    Free cashflow to firmGBP 3.1bnGBP 3.5bnGBP 3.8bnGBP 4.2bnGBP 4.6bn+10.1%
    Discount factor0.97170.91740.86620.81780.7721-
    Present valueGBP 3.1bnGBP 3.2bnGBP 3.3bnGBP 3.4bnGBP 3.6bn+3.9%
    Present Value Of The ForecastGBP 16.5bn

    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
    Beta0.300Clamped from a reported -0.057
    Cost of equity6.15%Risk-free + beta x equity risk premium
    Cost of debt5.22%Interest expense / average total debt
    Market capitalisationGBP 59.3bn86.8% of capital
    Total debtGBP 9.1bn13.2% of capital, book value as a proxy
    Tax rate16.1%Effective, capped at statutory
    WACC5.92%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 28.73

    82% of EV

    Forecast FCFF, final year
    GBP 4.6bn
    Capex at depreciation, working capital in reinvestment
    GBP 4.2bn
    Less reinvestment at g/ROIC (22.1% of NOPAT)
    GBP -932.0m
    Capitalised
    GBP 3.3bn
    ROIC (reported)
    11.3%
    Terminal value, undiscounted
    GBP 98.4bn
    Terminal value, discounted
    GBP 76.0bn
    Enterprise value
    GBP 92.5bn
    Less net debt
    GBP 5.4bn
    Equity value
    GBP 87.1bn

    Exit at 16.8x EBITDA

    Value per shareGBP 30.10

    83% of EV

    Terminal value, undiscounted
    GBP 103.8bn
    Terminal value, discounted
    GBP 80.1bn
    Enterprise value
    GBP 96.7bn
    Less net debt
    GBP 5.4bn
    Equity value
    GBP 91.2bn

    Spread between methods: 5%.

    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%
    3.92%46.5255.1569.83100.49204.78
    4.92%32.6436.0240.7848.0060.28
    5.92%25.0426.6628.7331.4935.38
    6.92%20.2421.0922.1223.3925.03
    7.92%16.9317.4017.9418.5819.36

    Outlined: this model. Green text: above today's price of 20.25. 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 year10.1%3.2%-6.9pp
    EBIT margin9.7%6.6%-3.1pp
    Discount rate5.9%7.3%+1.4pp
    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.