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    Baker Hughes Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 41.99

    Market price

    USD 57.25

    Implied upside

    -26.6%

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

    Value Per Share

    Perpetuity growth
    USD 41.99-26.6%
    Exit multiple
    USD 66.29+15.8%
    Market price
    USD 57.25

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 30.4bnUSD 33.2bnUSD 36.4bnUSD 39.8bnUSD 43.5bn+9.4%
    EBITUSD 3.4bnUSD 3.7bnUSD 4.0bnUSD 4.4bnUSD 4.8bn+9.4%
    NOPATUSD 2.8bnUSD 3.0bnUSD 3.3bnUSD 3.6bnUSD 4.0bn+9.4%
    Add depreciation & amortisationUSD 1.3bnUSD 1.5bnUSD 1.6bnUSD 1.8bnUSD 1.9bn+9.4%
    Less capital expenditureUSD -1.4bnUSD -1.5bnUSD -1.7bnUSD -1.9bnUSD -2.0bn+9.4%
    Less increase in working capitalUSD 27.1mUSD 29.6mUSD 32.4mUSD 35.5mUSD 38.8m-9.4%
    Free cashflow to firmUSD 2.7bnUSD 3.0bnUSD 3.3bnUSD 3.6bnUSD 3.9bn+9.4%
    Discount factor0.95450.86970.79240.72200.6579-
    Present valueUSD 2.6bnUSD 2.6bnUSD 2.6bnUSD 2.6bnUSD 2.6bn-0.3%
    Present Value Of The ForecastUSD 12.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.974Reported 0.961, pulled toward 1.0 (Blume)
    Cost of equity10.35%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 56.8bn90.3% of capital
    Total debtUSD 6.1bn9.7% of capital, book value as a proxy
    Tax rate17.3%Effective, capped at statutory
    WACC9.75%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 41.99

    71% of EV

    Forecast FCFF, final year
    USD 3.9bn
    Capex at depreciation, working capital in reinvestment
    USD 4.3bn
    Less reinvestment at g/ROIC (22.7% of NOPAT)
    USD -985.2m
    Capitalised
    USD 3.4bn
    ROIC (reported)
    11.0%
    Terminal value, undiscounted
    USD 47.4bn
    Terminal value, discounted
    USD 31.2bn
    Enterprise value
    USD 44.1bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 41.7bn

    Exit at 12.5x EBITDA

    Value per shareUSD 66.29

    81% of EV

    Terminal value, undiscounted
    USD 84.1bn
    Terminal value, discounted
    USD 55.3bn
    Enterprise value
    USD 68.3bn
    Less net debt
    USD 2.4bn
    Equity value
    USD 65.9bn

    Spread between methods: 45%.

    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%
    7.75%54.9856.5058.2860.4263.01
    8.75%47.1047.9148.8449.9051.14
    9.75%41.1341.5441.9942.4943.05
    10.75%36.4636.6336.8036.9837.17
    11.75%32.9333.0433.1533.2633.38

    Outlined: this model. Green text: above today's price of 57.25. 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 year9.4%16.9%+7.5pp
    EBIT margin11.1%15.1%+4.0pp
    Discount rate9.8%7.8%-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.