DCF Studio

    CBA.AX · ASX · Financial Services

    Commonwealth Bank of Australia

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD -0.40

    Market price

    AUD 152.43

    Implied upside

    -100.3%

    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.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.

    Current EV/EBITDA of 24.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    AUD -0.40-100.3%
    Exit multiple
    AUD 100.44-34.1%
    Market price
    AUD 152.43

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0bn6bn13bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 31.0bnAUD 32.2bnAUD 33.4bnAUD 34.7bnAUD 36.0bn+3.8%
    EBITAUD 16.1bnAUD 16.7bnAUD 17.3bnAUD 17.9bnAUD 18.6bn+3.8%
    NOPATAUD 11.2bnAUD 11.7bnAUD 12.1bnAUD 12.6bnAUD 13.0bn+3.8%
    Add depreciation & amortisationAUD 1.5bnAUD 1.6bnAUD 1.6bnAUD 1.7bnAUD 1.8bn+3.8%
    Less capital expenditureAUD -1.8bnAUD -1.9bnAUD -1.9bnAUD -2.0bnAUD -2.1bn+3.8%
    Less increase in working capitalAUD 221.5mAUD 229.8mAUD 238.4mAUD 247.4mAUD 256.7m-3.8%
    Free cashflow to firmAUD 11.2bnAUD 11.6bnAUD 12.0bnAUD 12.5bnAUD 13.0bn+3.8%
    Discount factor0.96200.89040.82410.76270.7059-
    Present valueAUD 10.8bnAUD 10.3bnAUD 9.9bnAUD 9.5bnAUD 9.1bn-4.0%
    Present Value Of The ForecastAUD 49.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.865Reported 0.799, pulled toward 1.0 (Blume)
    Cost of equity10.54%Risk-free + beta x equity risk premium
    Cost of debt7.35%Implied cost of debt of 18.5% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationAUD 254.8bn53.8% of capital
    Total debtAUD 218.9bn46.2% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC8.05%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 shareAUD -0.40

    71% of EV

    Forecast FCFF, final year
    AUD 13.0bn
    Capex at depreciation, working capital in reinvestment
    AUD 13.2bn
    Less reinvestment at g/ROIC (31.1% of NOPAT)
    AUD -4.1bn
    Capitalised
    AUD 9.1bn
    ROIC (WACC floor)
    8.0%
    Terminal value, undiscounted
    AUD 168.4bn
    Terminal value, discounted
    AUD 118.9bn
    Enterprise value
    AUD 168.6bn
    Less net debt
    AUD 169.2bn
    Equity value
    AUD -668.7m

    Exit at 20.0x EBITDA

    Value per shareAUD 100.44

    85% of EV

    Terminal value, undiscounted
    AUD 407.5bn
    Terminal value, discounted
    AUD 287.7bn
    Enterprise value
    AUD 337.4bn
    Less net debt
    AUD 169.2bn
    Equity value
    AUD 168.1bn

    Sensitivity

    Value per share (AUD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.05%31.7632.2632.7633.2633.76
    7.05%13.0013.4113.8214.2314.65
    8.05%-1.09-0.75-0.40-0.050.29
    9.05%-12.06-11.76-11.47-11.17-10.88
    10.05%-20.83-20.58-20.32-20.07-19.81

    Outlined: this model. Green text: above today's price of 152.43. 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 year3.8%26.7%+23.0pp
    Discount rate8.0%3.5%-4.5pp
    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.