DCF Studio

    CF · NYQ · Basic Materials

    CF Industries Holdings, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 103.96

    Market price

    USD 127.70

    Implied upside

    -18.6%

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

    Value Per Share

    Perpetuity growth
    USD 103.96-18.6%
    Exit multiple
    USD 72.48-43.2%
    Market price
    USD 127.70

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.1bnUSD 5.2bnUSD 4.5bnUSD 3.9bnUSD 3.3bn-14.1%
    EBITUSD 2.2bnUSD 1.9bnUSD 1.6bnUSD 1.4bnUSD 1.2bn-14.1%
    NOPATUSD 1.8bnUSD 1.5bnUSD 1.3bnUSD 1.1bnUSD 979.3m-14.1%
    Add depreciation & amortisationUSD 744.7mUSD 639.5mUSD 549.2mUSD 471.6mUSD 405.0m-14.1%
    Less capital expenditureUSD -795.9mUSD -683.5mUSD -586.9mUSD -504.0mUSD -432.8m-14.1%
    Less increase in working capitalUSD 102.0mUSD 87.6mUSD 75.2mUSD 64.6mUSD 55.5m+14.1%
    Free cashflow to firmUSD 1.9bnUSD 1.6bnUSD 1.4bnUSD 1.2bnUSD 1.0bn-14.1%
    Discount factor0.96400.89580.83240.77350.7188-
    Present valueUSD 1.8bnUSD 1.4bnUSD 1.1bnUSD 907.0mUSD 723.8m-20.2%
    Present Value Of The ForecastUSD 6.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.597Reported 0.399, pulled toward 1.0 (Blume)
    Cost of equity8.28%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 19.3bn84.2% of capital
    Total debtUSD 3.6bn15.8% of capital, book value as a proxy
    Tax rate19.0%Effective, capped at statutory
    WACC7.61%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 103.96

    68% of EV

    Forecast FCFF, final year
    USD 1.0bn
    Capex at depreciation, working capital in reinvestment
    USD 979.3m
    Less reinvestment at g/ROIC (11.1% of NOPAT)
    USD -109.0m
    Capitalised
    USD 870.3m
    ROIC (reported)
    22.5%
    Terminal value, undiscounted
    USD 17.4bn
    Terminal value, discounted
    USD 12.5bn
    Enterprise value
    USD 18.5bn
    Less net debt
    USD 1.7bn
    Equity value
    USD 16.9bn

    Exit at 6.4x EBITDA

    Value per shareUSD 72.48

    55% of EV

    Terminal value, undiscounted
    USD 10.3bn
    Terminal value, discounted
    USD 7.4bn
    Enterprise value
    USD 13.4bn
    Less net debt
    USD 1.7bn
    Equity value
    USD 11.8bn

    Spread between methods: 36%.

    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%
    5.61%136.86149.55166.28189.38223.36
    6.61%111.21118.53127.60139.16154.39
    7.61%93.8998.49103.96110.60118.83
    8.61%81.3984.4587.9992.1497.09
    9.61%71.9374.0476.4479.2082.38

    Outlined: this model. Green text: above today's price of 127.70. 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-14.1%-10.1%+4.0pp
    EBIT margin36.5%44.2%+7.7pp
    Discount rate7.6%6.6%-1.0pp
    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.