DCF Studio

    CHTR · NMS · Communication Services

    Charter Communications, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 1453.11

    Market price

    USD 128.17

    Implied upside

    +1033.7%

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

    Wrong toolThis model values the shares at 11.3x the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.

    Value Per Share

    Perpetuity growth
    USD 1453.11+1033.7%
    Exit multiple
    USD 222.13+73.3%
    Market price
    USD 128.17

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn8bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 55.0bnUSD 55.3bnUSD 55.5bnUSD 55.8bnUSD 56.1bn+0.5%
    EBITUSD 12.9bnUSD 13.0bnUSD 13.0bnUSD 13.1bnUSD 13.2bn+0.5%
    NOPATUSD 10.2bnUSD 10.3bnUSD 10.3bnUSD 10.4bnUSD 10.4bn+0.5%
    Add depreciation & amortisationUSD 8.8bnUSD 8.9bnUSD 8.9bnUSD 8.9bnUSD 9.0bn+0.5%
    Less capital expenditureUSD -10.9bnUSD -11.0bnUSD -11.0bnUSD -11.1bnUSD -11.1bn+0.5%
    Less increase in working capitalUSD -193.3mUSD -194.2mUSD -195.1mUSD -196.0mUSD -196.9m+0.5%
    Free cashflow to firmUSD 7.9bnUSD 7.9bnUSD 8.0bnUSD 8.0bnUSD 8.0bn+0.5%
    Discount factor0.97640.93080.88740.84600.8065-
    Present valueUSD 7.7bnUSD 7.4bnUSD 7.1bnUSD 6.8bnUSD 6.5bn-4.2%
    Present Value Of The ForecastUSD 35.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.790Reported 0.687, pulled toward 1.0 (Blume)
    Cost of equity9.34%Risk-free + beta x equity risk premium
    Cost of debt5.23%Interest expense / average total debt
    Market capitalisationUSD 16.7bn14.6% of capital
    Total debtUSD 97.1bn85.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC4.89%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 1453.11

    88% of EV

    Forecast FCFF, final year
    USD 8.0bn
    Capex at depreciation, working capital in reinvestment
    USD 10.4bn
    Less reinvestment at g/ROIC (27.2% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 7.6bn
    ROIC (reported)
    9.2%
    Terminal value, undiscounted
    USD 324.1bn
    Terminal value, discounted
    USD 261.4bn
    Enterprise value
    USD 296.8bn
    Less net debt
    USD 96.6bn
    Equity value
    USD 200.2bn

    Exit at 5.1x EBITDA

    Value per shareUSD 222.13

    72% of EV

    Terminal value, undiscounted
    USD 113.8bn
    Terminal value, discounted
    USD 91.8bn
    Enterprise value
    USD 127.2bn
    Less net debt
    USD 96.6bn
    Equity value
    USD 30.6bn

    Spread between methods: 147%.

    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%
    2.89%3614.155496.7312154.28——
    3.89%1817.022240.152964.434495.449908.43
    4.89%1079.241234.451453.121785.522354.07
    5.89%677.45745.30832.21948.051110.97
    6.89%424.76456.03493.72540.32599.74

    Outlined: this model. Green text: above today's price of 128.17. 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 year0.5%-23.1%-23.6pp
    EBIT margin23.5%9.5%-14.0pp
    Discount rate4.9%8.9%+4.0pp
    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.