DCF Studio

    COH.AX · ASX · Healthcare

    Cochlear Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 72.92

    Market price

    AUD 133.90

    Implied upside

    -45.5%

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

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

    Current EV/EBITDA of 28.0x 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 72.92-45.5%
    Exit multiple
    AUD 149.42+11.6%
    Market price
    AUD 133.90

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m151m302mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 2.5bnAUD 2.7bnAUD 2.8bnAUD 3.0bnAUD 3.2bn+6.6%
    EBITAUD 381.0mAUD 406.2mAUD 433.2mAUD 461.9mAUD 492.6m+6.6%
    NOPATAUD 283.1mAUD 301.8mAUD 321.9mAUD 343.2mAUD 366.0m+6.6%
    Add depreciation & amortisationAUD 102.0mAUD 108.7mAUD 116.0mAUD 123.6mAUD 131.9m+6.6%
    Less capital expenditureAUD -107.7mAUD -114.9mAUD -122.5mAUD -130.6mAUD -139.3m+6.6%
    Less increase in working capitalAUD -43.8mAUD -46.7mAUD -49.8mAUD -53.1mAUD -56.6m+6.6%
    Free cashflow to firmAUD 233.5mAUD 249.0mAUD 265.5mAUD 283.2mAUD 301.9m+6.6%
    Discount factor0.96080.88690.81870.75580.6977-
    Present valueAUD 224.4mAUD 220.9mAUD 217.4mAUD 214.0mAUD 210.6m-1.6%
    Present Value Of The ForecastAUD 1.1bn

    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
    Beta0.513Reported 0.273, pulled toward 1.0 (Blume)
    Cost of equity8.43%Risk-free + beta x equity risk premium
    Cost of debt5.89%Interest expense / average total debt
    Market capitalisationAUD 8.8bn97.6% of capital
    Total debtAUD 212.7m2.4% of capital, book value as a proxy
    Tax rate25.7%Effective, capped at statutory
    WACC8.33%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 72.92

    77% of EV

    Forecast FCFF, final year
    AUD 301.9m
    Capex at depreciation, working capital in reinvestment
    AUD 366.0m
    Less reinvestment at g/ROIC (17.4% of NOPAT)
    AUD -63.7m
    Capitalised
    AUD 302.3m
    ROIC (reported)
    14.4%
    Terminal value, undiscounted
    AUD 5.3bn
    Terminal value, discounted
    AUD 3.7bn
    Enterprise value
    AUD 4.8bn
    Less net debt
    AUD 25.0m
    Equity value
    AUD 4.8bn

    Exit at 20.0x EBITDA

    Value per shareAUD 149.42

    89% of EV

    Terminal value, undiscounted
    AUD 12.5bn
    Terminal value, discounted
    AUD 8.7bn
    Enterprise value
    AUD 9.8bn
    Less net debt
    AUD 25.0m
    Equity value
    AUD 9.8bn

    Spread between methods: 69%.

    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%
    6.33%96.92103.10110.86120.91134.45
    7.33%80.0883.6687.9693.2299.81
    8.33%68.1970.3872.9275.9279.50
    9.33%59.3560.7362.2964.0866.15
    10.33%52.5253.4054.3855.4756.71

    Outlined: this model. Green text: above today's price of 133.90. 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 year6.6%23.5%+16.9pp
    EBIT margin15.2%27.3%+12.1pp
    Discount rate8.3%5.7%-2.7pp
    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.