DCF Studio

    CSX · NMS · Industrials

    CSX Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 11.84

    Market price

    USD 47.10

    Implied upside

    -74.9%

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

    AdjustedCapital expenditure runs at 16.9% of revenue against depreciation of 11.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 11.84-74.9%
    Exit multiple
    USD 32.72-30.5%
    Market price
    USD 47.10

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 13.8bnUSD 13.6bnUSD 13.4bnUSD 13.1bnUSD 12.9bn-1.7%
    EBITUSD 5.1bnUSD 5.0bnUSD 4.9bnUSD 4.8bnUSD 4.8bn-1.7%
    NOPATUSD 4.0bnUSD 4.0bnUSD 3.9bnUSD 3.8bnUSD 3.8bn-1.7%
    Add depreciation & amortisationUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.4bn-1.7%
    Less capital expenditureUSD -2.3bnUSD -2.3bnUSD -2.3bnUSD -2.2bnUSD -2.2bn-1.7%
    Less increase in working capitalUSD 154.9mUSD 152.2mUSD 149.6mUSD 147.0mUSD 144.4m+1.7%
    Free cashflow to firmUSD 3.4bnUSD 3.3bnUSD 3.3bnUSD 3.2bnUSD 3.2bn-1.7%
    Discount factor0.95380.86760.78920.71790.6530-
    Present valueUSD 3.2bnUSD 2.9bnUSD 2.6bnUSD 2.3bnUSD 2.1bn-10.6%
    Present Value Of The ForecastUSD 13.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.139Reported 1.207, pulled toward 1.0 (Blume)
    Cost of equity11.26%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 87.3bn81.8% of capital
    Total debtUSD 19.4bn18.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.93%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 11.84

    68% of EV

    Forecast FCFF, final year
    USD 3.2bn
    Capex at depreciation, working capital in reinvestment
    USD 3.8bn
    Less reinvestment at g/ROIC (17.8% of NOPAT)
    USD -669.1m
    Capitalised
    USD 3.1bn
    ROIC (reported)
    14.0%
    Terminal value, undiscounted
    USD 42.6bn
    Terminal value, discounted
    USD 27.8bn
    Enterprise value
    USD 40.9bn
    Less net debt
    USD 18.7bn
    Equity value
    USD 22.2bn

    Exit at 16.6x EBITDA

    Value per shareUSD 32.72

    84% of EV

    Terminal value, undiscounted
    USD 102.5bn
    Terminal value, discounted
    USD 66.9bn
    Enterprise value
    USD 80.0bn
    Less net debt
    USD 18.7bn
    Equity value
    USD 61.3bn

    Spread between methods: 94%.

    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%
    7.93%17.3418.2719.3620.6522.23
    8.93%13.7914.3615.0215.7716.66
    9.93%11.0811.4411.8412.3012.81
    10.93%8.949.179.429.6910.00
    11.93%7.217.357.507.677.84

    Outlined: this model. Green text: above today's price of 47.10. 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-1.7%25.7%+27.4pp
    EBIT margin36.8%93.0%+56.1pp
    Discount rate9.9%5.2%-4.7pp
    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.