DCF Studio

    BDX · NYQ · Healthcare

    Becton, Dickinson and Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 100.48

    Market price

    USD 180.94

    Implied upside

    -44.5%

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

    AdjustedReported capital expenditure averages 4.19% of revenue against depreciation and amortisation of 11.56%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 11.56% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 100.48-44.5%
    Exit multiple
    USD 193.98+7.2%
    Market price
    USD 180.94

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 22.9bnUSD 24.1bnUSD 25.3bnUSD 26.5bnUSD 27.9bn+5.0%
    EBITUSD 3.1bnUSD 3.2bnUSD 3.4bnUSD 3.5bnUSD 3.7bn+5.0%
    NOPATUSD 2.8bnUSD 2.9bnUSD 3.1bnUSD 3.2bnUSD 3.4bn+5.0%
    Add depreciation & amortisationUSD 2.6bnUSD 2.8bnUSD 2.9bnUSD 3.1bnUSD 3.2bn+5.0%
    Less capital expenditureUSD -2.6bnUSD -2.8bnUSD -2.9bnUSD -3.1bnUSD -3.2bn+5.0%
    Less increase in working capitalUSD -524.9mUSD -551.1mUSD -578.6mUSD -607.5mUSD -637.8m+5.0%
    Free cashflow to firmUSD 2.2bnUSD 2.4bnUSD 2.5bnUSD 2.6bnUSD 2.7bn+5.0%
    Discount factor0.96720.90470.84630.79170.7405-
    Present valueUSD 2.2bnUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.0bn-1.8%
    Present Value Of The ForecastUSD 10.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.515Reported 0.276, pulled toward 1.0 (Blume)
    Cost of equity7.83%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 49.3bn72.0% of capital
    Total debtUSD 19.2bn28.0% of capital, book value as a proxy
    Tax rate9.5%Effective, capped at statutory
    WACC6.90%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 100.48

    78% of EV

    Forecast FCFF, final year
    USD 2.7bn
    Capex at depreciation, working capital in reinvestment
    USD 3.4bn
    Less reinvestment at g/ROIC (36.2% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 2.1bn
    ROIC (WACC floor)
    6.9%
    Terminal value, undiscounted
    USD 50.0bn
    Terminal value, discounted
    USD 37.0bn
    Enterprise value
    USD 47.5bn
    Less net debt
    USD 18.5bn
    Equity value
    USD 29.0bn

    Exit at 12.4x EBITDA

    Value per shareUSD 193.98

    86% of EV

    Terminal value, undiscounted
    USD 86.4bn
    Terminal value, discounted
    USD 64.0bn
    Enterprise value
    USD 74.5bn
    Less net debt
    USD 18.5bn
    Equity value
    USD 56.0bn

    Spread between methods: 64%.

    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%
    4.90%178.24184.64193.36206.20227.58
    5.90%128.04128.81129.57130.33131.10
    6.90%99.2399.86100.48101.11101.73
    7.90%77.7778.2978.8279.3479.87
    8.90%61.1761.6262.0762.5162.96

    Outlined: this model. Green text: above today's price of 180.94. 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 year5.0%16.8%+11.8pp
    EBIT margin13.4%19.6%+6.2pp
    Discount rate6.9%5.0%-1.9pp
    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.