DCF Studio

    CDW · NMS · Technology

    CDW Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 103.26

    Market price

    USD 146.19

    Implied upside

    -29.4%

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

    AdjustedReported capital expenditure averages just 0.58% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 103.26-29.4%
    Exit multiple
    USD 115.66-20.9%
    Market price
    USD 146.19

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 22.0bnUSD 21.6bnUSD 21.2bnUSD 20.8bnUSD 20.4bn-1.9%
    EBITUSD 1.7bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.5bn-1.9%
    NOPATUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.2bnUSD 1.2bn-1.9%
    Add depreciation & amortisationUSD 281.5mUSD 276.2mUSD 271.0mUSD 265.8mUSD 260.8m-1.9%
    Less capital expenditureUSD -220.0mUSD -215.8mUSD -211.7mUSD -207.7mUSD -203.8m-1.9%
    Less increase in working capitalUSD 21.3mUSD 20.9mUSD 20.5mUSD 20.1mUSD 19.7m+1.9%
    Free cashflow to firmUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.3bnUSD 1.3bn-1.9%
    Discount factor0.95890.88170.81070.74540.6854-
    Present valueUSD 1.3bnUSD 1.2bnUSD 1.1bnUSD 988.5mUSD 891.6m-9.8%
    Present Value Of The ForecastUSD 5.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.960Reported 0.941, pulled toward 1.0 (Blume)
    Cost of equity10.28%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 18.3bn75.9% of capital
    Total debtUSD 5.8bn24.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.76%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 103.26

    71% of EV

    Forecast FCFF, final year
    USD 1.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (15.1% of NOPAT)
    USD -209.7m
    Capitalised
    USD 1.2bn
    ROIC (reported)
    16.6%
    Terminal value, undiscounted
    USD 19.4bn
    Terminal value, discounted
    USD 13.3bn
    Enterprise value
    USD 18.8bn
    Less net debt
    USD 5.2bn
    Equity value
    USD 13.6bn

    Exit at 12.0x EBITDA

    Value per shareUSD 115.66

    73% of EV

    Terminal value, undiscounted
    USD 21.8bn
    Terminal value, discounted
    USD 14.9bn
    Enterprise value
    USD 20.4bn
    Less net debt
    USD 5.2bn
    Equity value
    USD 15.3bn

    Spread between methods: 11%.

    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%
    6.76%142.49152.65165.15180.92201.45
    7.76%114.76120.98128.34137.21148.10
    8.76%94.6598.65103.26108.62114.97
    9.76%79.4082.0685.0588.4692.37
    10.76%67.4369.2371.2373.4575.95

    Outlined: this model. Green text: above today's price of 146.19. 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-1.9%4.5%+6.4pp
    EBIT margin7.6%10.2%+2.6pp
    Discount rate8.8%7.2%-1.5pp
    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.