DCF Studio

    BMY · NYQ · Healthcare

    Bristol-Myers Squibb Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 57.07

    Market price

    USD 63.06

    Implied upside

    -9.5%

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

    AdjustedReported capital expenditure averages 2.60% of revenue against depreciation and amortisation of 18.04%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 18.04% 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 57.07-9.5%
    Exit multiple
    USD 67.24+6.6%
    Market price
    USD 63.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 48.9bnUSD 49.6bnUSD 50.3bnUSD 51.1bnUSD 51.8bn+1.4%
    EBITUSD 9.6bnUSD 9.7bnUSD 9.9bnUSD 10.0bnUSD 10.2bn+1.4%
    NOPATUSD 7.9bnUSD 8.0bnUSD 8.1bnUSD 8.3bnUSD 8.4bn+1.4%
    Add depreciation & amortisationUSD 8.8bnUSD 8.9bnUSD 9.1bnUSD 9.2bnUSD 9.3bn+1.4%
    Less capital expenditureUSD -8.8bnUSD -8.9bnUSD -9.1bnUSD -9.2bnUSD -9.3bn+1.4%
    Less increase in working capitalUSD 698.4mUSD 708.6mUSD 718.8mUSD 729.2mUSD 739.8m-1.4%
    Free cashflow to firmUSD 8.6bnUSD 8.7bnUSD 8.9bnUSD 9.0bnUSD 9.1bn+1.4%
    Discount factor0.96810.90730.85030.79690.7468-
    Present valueUSD 8.3bnUSD 7.9bnUSD 7.5bnUSD 7.2bnUSD 6.8bn-4.9%
    Present Value Of The ForecastUSD 37.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.482Reported 0.227, pulled toward 1.0 (Blume)
    Cost of equity7.65%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 128.8bn73.2% of capital
    Total debtUSD 47.1bn26.8% of capital, book value as a proxy
    Tax rate17.7%Effective, capped at statutory
    WACC6.70%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 57.07

    75% of EV

    Forecast FCFF, final year
    USD 9.1bn
    Capex at depreciation, working capital in reinvestment
    USD 8.4bn
    Less reinvestment at g/ROIC (24.5% of NOPAT)
    USD -2.1bn
    Capitalised
    USD 6.3bn
    ROIC (reported)
    10.2%
    Terminal value, undiscounted
    USD 154.1bn
    Terminal value, discounted
    USD 115.1bn
    Enterprise value
    USD 152.8bn
    Less net debt
    USD 36.5bn
    Equity value
    USD 116.4bn

    Exit at 9.3x EBITDA

    Value per shareUSD 67.24

    78% of EV

    Terminal value, undiscounted
    USD 181.9bn
    Terminal value, discounted
    USD 135.8bn
    Enterprise value
    USD 173.6bn
    Less net debt
    USD 36.5bn
    Equity value
    USD 137.1bn

    Spread between methods: 16%.

    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%
    4.70%91.75102.80118.79144.09190.29
    5.70%66.9571.8978.3487.1099.78
    6.70%51.6554.0957.0760.8365.70
    7.70%41.2542.4943.9445.6647.77
    8.70%33.7234.3235.0035.7736.67

    Outlined: this model. Green text: above today's price of 63.06. 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 year1.4%2.8%+1.3pp
    EBIT margin19.6%21.3%+1.6pp
    Discount rate6.7%6.4%-0.3pp
    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.