DCF Studio

    CL · NYQ · Consumer Defensive

    Colgate-Palmolive Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 82.66

    Market price

    USD 87.47

    Implied upside

    -5.5%

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

    Value Per Share

    Perpetuity growth
    USD 82.66-5.5%
    Exit multiple
    USD 97.37+11.3%
    Market price
    USD 87.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 21.3bnUSD 22.2bnUSD 23.1bnUSD 24.1bnUSD 25.1bn+4.3%
    EBITUSD 4.4bnUSD 4.6bnUSD 4.8bnUSD 5.0bnUSD 5.2bn+4.3%
    NOPATUSD 3.5bnUSD 3.7bnUSD 3.8bnUSD 4.0bnUSD 4.1bn+4.3%
    Add depreciation & amortisationUSD 640.3mUSD 667.8mUSD 696.4mUSD 726.3mUSD 757.5m+4.3%
    Less capital expenditureUSD -693.8mUSD -723.6mUSD -754.6mUSD -787.0mUSD -820.8m+4.3%
    Less increase in working capitalUSD 467.4mUSD 487.5mUSD 508.4mUSD 530.3mUSD 553.0m-4.3%
    Free cashflow to firmUSD 3.9bnUSD 4.1bnUSD 4.3bnUSD 4.4bnUSD 4.6bn+4.3%
    Discount factor0.96420.89640.83340.77490.7204-
    Present valueUSD 3.8bnUSD 3.7bnUSD 3.6bnUSD 3.4bnUSD 3.3bn-3.0%
    Present Value Of The ForecastUSD 17.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.546Reported 0.323, pulled toward 1.0 (Blume)
    Cost of equity8.00%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 69.7bn89.1% of capital
    Total debtUSD 8.6bn10.9% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.56%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 82.66

    76% of EV

    Forecast FCFF, final year
    USD 4.6bn
    Capex at depreciation, working capital in reinvestment
    USD 4.1bn
    Less reinvestment at g/ROIC (6.5% of NOPAT)
    USD -269.7m
    Capitalised
    USD 3.9bn
    ROIC (reported)
    38.4%
    Terminal value, undiscounted
    USD 78.5bn
    Terminal value, discounted
    USD 56.5bn
    Enterprise value
    USD 74.3bn
    Less net debt
    USD 7.3bn
    Equity value
    USD 67.0bn

    Exit at 15.8x EBITDA

    Value per shareUSD 97.37

    79% of EV

    Terminal value, undiscounted
    USD 95.1bn
    Terminal value, discounted
    USD 68.5bn
    Enterprise value
    USD 86.2bn
    Less net debt
    USD 7.3bn
    Equity value
    USD 79.0bn

    Spread between methods: 16%.

    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%
    5.56%110.20122.76139.41162.53196.86
    6.56%87.4594.85104.06115.84131.46
    7.56%72.1976.9682.6689.6098.23
    8.56%61.2464.5068.2972.7678.10
    9.56%52.9955.3357.9861.0364.59

    Outlined: this model. Green text: above today's price of 87.47. 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 year4.3%5.3%+1.0pp
    EBIT margin20.9%22.0%+1.1pp
    Discount rate7.6%7.3%-0.3pp
    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.