DCF Studio

    CPG.L · LSE · Consumer Cyclical

    Compass Group PLC

    Also onConsensus Drift

    Implied value per share

    USD 40.61

    Market price

    USD 29.97

    Implied upside

    +35.5%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    USD 40.61+35.5%
    Exit multiple
    USD 55.72+85.9%
    Market price
    USD 29.97

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 54.1bnUSD 63.5bnUSD 74.5bnUSD 87.4bnUSD 102.6bn+17.4%
    EBITUSD 3.7bnUSD 4.3bnUSD 5.1bnUSD 5.9bnUSD 7.0bn+17.4%
    NOPATUSD 2.8bnUSD 3.2bnUSD 3.8bnUSD 4.5bnUSD 5.2bn+17.4%
    Add depreciation & amortisationUSD 1.0bnUSD 1.2bnUSD 1.4bnUSD 1.6bnUSD 1.9bn+17.4%
    Less capital expenditureUSD -1.0bnUSD -1.2bnUSD -1.4bnUSD -1.7bnUSD -2.0bn+17.4%
    Less increase in working capitalUSD -78.7mUSD -92.4mUSD -108.4mUSD -127.3mUSD -149.4m+17.4%
    Free cashflow to firmUSD 2.6bnUSD 3.1bnUSD 3.6bnUSD 4.3bnUSD 5.0bn+17.4%
    Discount factor0.96140.88870.82140.75930.7018-
    Present valueUSD 2.5bnUSD 2.7bnUSD 3.0bnUSD 3.2bnUSD 3.5bn+8.5%
    Present Value Of The ForecastUSD 15.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.765Reported 0.649, pulled toward 1.0 (Blume)
    Cost of equity8.71%Risk-free + beta x equity risk premium
    Cost of debt5.86%Interest expense / average total debt
    Market capitalisationUSD 51.0bn87.9% of capital
    Total debtUSD 7.0bn12.1% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC8.19%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 40.61

    80% of EV

    Forecast FCFF, final year
    USD 5.0bn
    Capex at depreciation, working capital in reinvestment
    USD 5.5bn
    Less reinvestment at g/ROIC (13.3% of NOPAT)
    USD -736.0m
    Capitalised
    USD 4.8bn
    ROIC (reported)
    18.7%
    Terminal value, undiscounted
    USD 86.1bn
    Terminal value, discounted
    USD 60.4bn
    Enterprise value
    USD 75.4bn
    Less net debt
    USD 6.4bn
    Equity value
    USD 69.0bn

    Exit at 13.8x EBITDA

    Value per shareUSD 55.72

    85% of EV

    Terminal value, undiscounted
    USD 122.7bn
    Terminal value, discounted
    USD 86.1bn
    Enterprise value
    USD 101.1bn
    Less net debt
    USD 6.4bn
    Equity value
    USD 94.7bn

    Spread between methods: 31%.

    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%
    6.19%54.8459.4065.1772.7383.09
    7.19%44.2546.9750.2654.3359.47
    8.19%36.8438.5840.6143.0245.94
    9.19%31.3732.5333.8535.3837.16
    10.19%27.1627.9628.8529.8631.02

    Outlined: this model. Green text: above today's price of 29.97. 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 year17.4%10.5%-6.8pp
    EBIT margin6.8%5.1%-1.7pp
    Discount rate8.2%9.9%+1.8pp
    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.