DCF Studio

    BAX · NYQ · Healthcare

    Baxter International Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 12.79

    Market price

    USD 22.80

    Implied upside

    -43.9%

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

    Value Per Share

    Perpetuity growth
    USD 12.79-43.9%
    Exit multiple
    USD 33.57+47.2%
    Market price
    USD 22.80

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m437m874mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 11.7bnUSD 12.1bnUSD 12.6bnUSD 13.0bnUSD 13.5bn+3.8%
    EBITUSD 355.9mUSD 369.4mUSD 383.4mUSD 397.9mUSD 413.0m+3.8%
    NOPATUSD 281.1mUSD 291.8mUSD 302.8mUSD 314.3mUSD 326.2m+3.8%
    Add depreciation & amortisationUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.3bn+3.8%
    Less capital expenditureUSD -568.6mUSD -590.2mUSD -612.5mUSD -635.7mUSD -659.8m+3.8%
    Less increase in working capitalUSD -75.7mUSD -78.5mUSD -81.5mUSD -84.6mUSD -87.8m+3.8%
    Free cashflow to firmUSD 753.0mUSD 781.5mUSD 811.1mUSD 841.8mUSD 873.7m+3.8%
    Discount factor0.96800.90710.85010.79660.7465-
    Present valueUSD 728.9mUSD 708.9mUSD 689.5mUSD 670.6mUSD 652.2m-2.7%
    Present Value Of The ForecastUSD 3.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.729Reported 0.595, pulled toward 1.0 (Blume)
    Cost of equity9.01%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 11.8bn54.7% of capital
    Total debtUSD 9.8bn45.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.71%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 12.79

    76% of EV

    Forecast FCFF, final year
    USD 873.7m
    Capex at depreciation, working capital in reinvestment
    USD 958.5m
    Less reinvestment at g/ROIC (37.2% of NOPAT)
    USD -357.0m
    Capitalised
    USD 601.5m
    ROIC (WACC floor)
    6.7%
    Terminal value, undiscounted
    USD 14.6bn
    Terminal value, discounted
    USD 10.9bn
    Enterprise value
    USD 14.4bn
    Less net debt
    USD 7.8bn
    Equity value
    USD 6.6bn

    Exit at 16.9x EBITDA

    Value per shareUSD 33.57

    86% of EV

    Terminal value, undiscounted
    USD 28.9bn
    Terminal value, discounted
    USD 21.6bn
    Enterprise value
    USD 25.0bn
    Less net debt
    USD 7.8bn
    Equity value
    USD 17.2bn

    Spread between methods: 90%.

    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%
    4.71%24.5324.6924.8525.0125.17
    5.71%17.5117.6317.7617.8918.02
    6.71%12.5812.6912.7912.9013.00
    7.71%8.949.039.129.209.29
    8.71%6.146.226.296.376.44

    Outlined: this model. Green text: above today's price of 22.80. 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%12.0%+8.2pp
    EBIT margin3.0%6.2%+3.1pp
    Discount rate6.7%5.0%-1.7pp
    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.