DCF Studio

    BCE.TO · TOR · Communication Services

    BCE Inc.

    Also onConsensus Drift

    Implied value per share

    CAD 103.23

    Market price

    CAD 30.90

    Implied upside

    +234.1%

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

    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 103.23+234.1%
    Exit multiple
    CAD 38.36+24.2%
    Market price
    CAD 30.90

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 24.6bnCAD 24.7bnCAD 24.8bnCAD 24.9bnCAD 25.0bn+0.4%
    EBITCAD 5.5bnCAD 5.5bnCAD 5.6bnCAD 5.6bnCAD 5.6bn+0.4%
    NOPATCAD 4.1bnCAD 4.1bnCAD 4.1bnCAD 4.1bnCAD 4.1bn+0.4%
    Add depreciation & amortisationCAD 5.0bnCAD 5.0bnCAD 5.0bnCAD 5.1bnCAD 5.1bn+0.4%
    Less capital expenditureCAD -4.5bnCAD -4.6bnCAD -4.6bnCAD -4.6bnCAD -4.6bn+0.4%
    Less increase in working capitalCAD -31.1mCAD -31.2mCAD -31.3mCAD -31.5mCAD -31.6m+0.4%
    Free cashflow to firmCAD 4.5bnCAD 4.5bnCAD 4.5bnCAD 4.6bnCAD 4.6bn+0.4%
    Discount factor0.97630.93050.88680.84520.8056-
    Present valueCAD 4.4bnCAD 4.2bnCAD 4.0bnCAD 3.8bnCAD 3.7bn-4.3%
    Present Value Of The ForecastCAD 20.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.741Reported 0.614, pulled toward 1.0 (Blume)
    Cost of equity7.38%Risk-free + beta x equity risk premium
    Cost of debt4.35%Interest expense / average total debt
    Market capitalisationCAD 28.8bn41.2% of capital
    Total debtCAD 41.1bn58.8% of capital, book value as a proxy
    Tax rate26.5%Effective, capped at statutory
    WACC4.92%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 shareCAD 103.23

    85% of EV

    Forecast FCFF, final year
    CAD 4.6bn
    Capex at depreciation, working capital in reinvestment
    CAD 5.0bn
    Less reinvestment at g/ROIC (32.2% of NOPAT)
    CAD -1.6bn
    Capitalised
    CAD 3.4bn
    ROIC (reported)
    7.8%
    Terminal value, undiscounted
    CAD 144.6bn
    Terminal value, discounted
    CAD 116.5bn
    Enterprise value
    CAD 136.6bn
    Less net debt
    CAD 40.7bn
    Equity value
    CAD 95.9bn

    Exit at 6.5x EBITDA

    Value per shareCAD 38.36

    74% of EV

    Terminal value, undiscounted
    CAD 69.8bn
    Terminal value, discounted
    CAD 56.2bn
    Enterprise value
    CAD 76.4bn
    Less net debt
    CAD 40.7bn
    Equity value
    CAD 35.6bn

    Spread between methods: 92%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    2.92%253.35370.29763.50——
    3.92%132.63158.13201.34291.09592.72
    4.92%82.4391.10103.23121.54152.51
    5.92%54.9058.2062.3967.9275.61
    6.92%37.5038.6339.9641.5543.54

    Outlined: this model. Green text: above today's price of 30.90. 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 year0.4%-14.4%-14.8pp
    EBIT margin22.5%9.2%-13.3pp
    Discount rate4.9%7.5%+2.6pp
    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.