DCF Studio

    BLDR · NYQ · Industrials

    Builders FirstSource, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 59.13

    Market price

    USD 58.12

    Implied upside

    +1.7%

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

    Value Per Share

    Perpetuity growth
    USD 59.13+1.7%
    Exit multiple
    USD 54.36-6.5%
    Market price
    USD 58.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 13.3bnUSD 11.6bnUSD 10.2bnUSD 8.9bnUSD 7.8bn-12.6%
    EBITUSD 1.5bnUSD 1.3bnUSD 1.1bnUSD 981.5mUSD 858.1m-12.6%
    NOPATUSD 1.2bnUSD 1.0bnUSD 886.8mUSD 775.4mUSD 677.9m-12.6%
    Add depreciation & amortisationUSD 424.1mUSD 370.8mUSD 324.2mUSD 283.5mUSD 247.9m-12.6%
    Less capital expenditureUSD -298.5mUSD -261.0mUSD -228.2mUSD -199.5mUSD -174.5m-12.6%
    Less increase in working capitalUSD 198.7mUSD 173.7mUSD 151.9mUSD 132.8mUSD 116.1m+12.6%
    Free cashflow to firmUSD 1.5bnUSD 1.3bnUSD 1.1bnUSD 992.1mUSD 867.5m-12.6%
    Discount factor0.95920.88260.81210.74730.6876-
    Present valueUSD 1.4bnUSD 1.1bnUSD 921.5mUSD 741.4mUSD 596.5m-19.5%
    Present Value Of The ForecastUSD 4.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.276Reported 1.412, pulled toward 1.0 (Blume)
    Cost of equity12.02%Risk-free + beta x equity risk premium
    Cost of debt5.81%Interest expense / average total debt
    Market capitalisationUSD 6.3bn55.1% of capital
    Total debtUSD 5.1bn44.9% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.68%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 59.13

    58% of EV

    Forecast FCFF, final year
    USD 867.5m
    Capex at depreciation, working capital in reinvestment
    USD 677.9m
    Less reinvestment at g/ROIC (13.3% of NOPAT)
    USD -90.4m
    Capitalised
    USD 587.5m
    ROIC (reported)
    18.7%
    Terminal value, undiscounted
    USD 9.7bn
    Terminal value, discounted
    USD 6.7bn
    Enterprise value
    USD 11.5bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 6.6bn

    Exit at 8.1x EBITDA

    Value per shareUSD 54.36

    56% of EV

    Terminal value, undiscounted
    USD 9.0bn
    Terminal value, discounted
    USD 6.2bn
    Enterprise value
    USD 11.0bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 6.1bn

    Spread between methods: 8%.

    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%
    6.68%82.6389.1797.25107.49120.92
    7.68%65.7269.7774.5880.4087.58
    8.68%53.4356.0759.1362.7166.96
    9.68%44.0645.8647.8950.2152.89
    10.68%36.6837.9339.3240.8842.64

    Outlined: this model. Green text: above today's price of 58.12. 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-12.6%-12.8%-0.2pp
    EBIT margin11.1%10.9%-0.1pp
    Discount rate8.7%8.8%+0.1pp
    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.