DCF Studio

    BBY · NYQ · Consumer Cyclical

    Best Buy Co., Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 54.06

    Market price

    USD 92.85

    Implied upside

    -41.8%

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

    Value Per Share

    Perpetuity growth
    USD 54.06-41.8%
    Exit multiple
    USD 65.73-29.2%
    Market price
    USD 92.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 40.3bnUSD 38.9bnUSD 37.5bnUSD 36.3bnUSD 35.0bn-3.4%
    EBITUSD 1.7bnUSD 1.6bnUSD 1.6bnUSD 1.5bnUSD 1.4bn-3.4%
    NOPATUSD 1.3bnUSD 1.3bnUSD 1.2bnUSD 1.2bnUSD 1.1bn-3.4%
    Add depreciation & amortisationUSD 823.9mUSD 795.6mUSD 768.3mUSD 741.9mUSD 716.4m-3.4%
    Less capital expenditureUSD -727.4mUSD -702.4mUSD -678.3mUSD -655.0mUSD -632.5m-3.4%
    Less increase in working capitalUSD -192.7mUSD -186.1mUSD -179.7mUSD -173.5mUSD -167.6m-3.4%
    Free cashflow to firmUSD 1.2bnUSD 1.2bnUSD 1.1bnUSD 1.1bnUSD 1.1bn-3.4%
    Discount factor0.95230.86350.78300.71000.6439-
    Present valueUSD 1.2bnUSD 1.0bnUSD 890.1mUSD 779.5mUSD 682.6m-12.4%
    Present Value Of The ForecastUSD 4.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.204Reported 1.305, pulled toward 1.0 (Blume)
    Cost of equity11.62%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 19.5bn82.5% of capital
    Total debtUSD 4.1bn17.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.28%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 54.06

    67% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.2bn
    Less reinvestment at g/ROIC (7.3% of NOPAT)
    USD -87.1m
    Capitalised
    USD 1.1bn
    ROIC (reported)
    34.1%
    Terminal value, undiscounted
    USD 14.5bn
    Terminal value, discounted
    USD 9.3bn
    Enterprise value
    USD 13.9bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 11.5bn

    Exit at 8.5x EBITDA

    Value per shareUSD 65.73

    72% of EV

    Terminal value, undiscounted
    USD 18.3bn
    Terminal value, discounted
    USD 11.8bn
    Enterprise value
    USD 16.3bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 13.9bn

    Spread between methods: 19%.

    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%
    8.28%66.9770.7975.2780.5887.00
    9.28%57.3360.0263.1066.6770.83
    10.28%49.8951.8554.0656.5659.43
    11.28%43.9745.4447.0748.8950.94
    12.28%39.1440.2741.5142.8744.38

    Outlined: this model. Green text: above today's price of 92.85. 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-3.4%5.0%+8.5pp
    EBIT margin4.1%6.6%+2.5pp
    Discount rate10.3%7.3%-3.0pp
    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.