DCF Studio

    BRO · NYQ · Financial Services

    Brown & Brown, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 116.78

    Market price

    USD 65.02

    Implied upside

    +79.6%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Value Per Share

    Perpetuity growth
    USD 116.78+79.6%
    Exit multiple
    USD 156.57+140.8%
    Market price
    USD 65.02

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.8bnUSD 7.9bnUSD 9.3bnUSD 10.9bnUSD 12.8bn+17.4%
    EBITUSD 1.9bnUSD 2.2bnUSD 2.6bnUSD 3.0bnUSD 3.5bn+17.4%
    NOPATUSD 1.5bnUSD 1.7bnUSD 2.0bnUSD 2.4bnUSD 2.8bn+17.4%
    Add depreciation & amortisationUSD 358.8mUSD 421.1mUSD 494.3mUSD 580.3mUSD 681.1m+17.4%
    Less capital expenditureUSD -101.9mUSD -119.6mUSD -140.4mUSD -164.8mUSD -193.5m+17.4%
    Less increase in working capitalUSD -44.5mUSD -52.2mUSD -61.3mUSD -72.0mUSD -84.5m+17.4%
    Free cashflow to firmUSD 1.7bnUSD 2.0bnUSD 2.3bnUSD 2.7bnUSD 3.2bn+17.4%
    Discount factor0.96380.89540.83180.77270.7179-
    Present valueUSD 1.6bnUSD 1.8bnUSD 1.9bnUSD 2.1bnUSD 2.3bn+9.0%
    Present Value Of The ForecastUSD 9.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.720Reported 0.582, pulled toward 1.0 (Blume)
    Cost of equity8.96%Risk-free + beta x equity risk premium
    Cost of debt5.11%Interest expense / average total debt
    Market capitalisationUSD 21.8bn73.3% of capital
    Total debtUSD 7.9bn26.7% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.64%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 116.78

    78% of EV

    Forecast FCFF, final year
    USD 3.2bn
    Capex at depreciation, working capital in reinvestment
    USD 3.2bn
    Less reinvestment at g/ROIC (26.8% of NOPAT)
    USD -863.8m
    Capitalised
    USD 2.4bn
    ROIC (reported)
    9.3%
    Terminal value, undiscounted
    USD 47.0bn
    Terminal value, discounted
    USD 33.7bn
    Enterprise value
    USD 43.4bn
    Less net debt
    USD 6.8bn
    Equity value
    USD 36.6bn

    Exit at 15.3x EBITDA

    Value per shareUSD 156.57

    83% of EV

    Terminal value, undiscounted
    USD 64.3bn
    Terminal value, discounted
    USD 46.2bn
    Enterprise value
    USD 55.8bn
    Less net debt
    USD 6.8bn
    Equity value
    USD 49.0bn

    Spread between methods: 29%.

    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%
    5.64%175.83187.35202.39222.95252.90
    6.64%137.40142.74149.28157.50168.20
    7.64%111.47113.92116.78120.17124.28
    8.64%92.8093.7794.8396.0197.36
    9.64%79.1779.5279.8880.2380.58

    Outlined: this model. Green text: above today's price of 65.02. 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 year17.4%5.8%-11.6pp
    EBIT margin27.4%15.6%-11.8pp
    Discount rate7.6%11.2%+3.5pp
    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.