DCF Studio

    CTEC.L · LSE · Healthcare

    Convatec Group PLC

    Also onConsensus Drift

    Implied value per share

    GBp 186.81

    Market price

    GBp 214.00

    Implied upside

    -12.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 0.7466

    AdjustedReports in USD, trades in GBp. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 186.81-12.7%
    Exit multiple
    GBp 182.92-14.5%
    Market price
    GBp 214.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m212m424mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 2.6bnUSD 2.7bnUSD 2.9bnUSD 3.0bnUSD 3.2bn+5.6%
    EBITUSD 343.6mUSD 362.8mUSD 383.0mUSD 404.4mUSD 426.9m+5.6%
    NOPATUSD 265.4mUSD 280.2mUSD 295.8mUSD 312.3mUSD 329.7m+5.6%
    Add depreciation & amortisationUSD 250.8mUSD 264.8mUSD 279.6mUSD 295.2mUSD 311.6m+5.6%
    Less capital expenditureUSD -166.8mUSD -176.1mUSD -185.9mUSD -196.2mUSD -207.2m+5.6%
    Less increase in working capitalUSD -8.2mUSD -8.6mUSD -9.1mUSD -9.6mUSD -10.2m+5.6%
    Free cashflow to firmUSD 341.2mUSD 360.3mUSD 380.4mUSD 401.6mUSD 424.0m+5.6%
    Discount factor0.96390.89560.83220.77320.7185-
    Present valueUSD 328.9mUSD 322.7mUSD 316.5mUSD 310.5mUSD 304.6m-1.9%
    Present Value Of The ForecastUSD 1.6bn

    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
    Beta0.843Reported 0.765, pulled toward 1.0 (Blume)
    Cost of equity9.13%Risk-free + beta x equity risk premium
    Cost of debt4.56%Interest expense / average total debt
    Market capitalisationUSD 4.1bn73.1% of capital
    Total debtUSD 1.5bn26.9% of capital, book value as a proxy
    Tax rate22.8%Effective, capped at statutory
    WACC7.62%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 2.50

    76% of EV

    Forecast FCFF, final year
    USD 424.0m
    Capex at depreciation, working capital in reinvestment
    USD 499.8m
    Less reinvestment at g/ROIC (31.0% of NOPAT)
    USD -154.9m
    Capitalised
    USD 344.9m
    ROIC (reported)
    8.1%
    Terminal value, undiscounted
    USD 6.9bn
    Terminal value, discounted
    USD 5.0bn
    Enterprise value
    USD 6.5bn
    Less net debt
    USD 1.4bn
    Equity value
    USD 5.1bn

    Exit at 9.1x EBITDA

    Value per shareUSD 2.45

    75% of EV

    Terminal value, undiscounted
    USD 6.8bn
    Terminal value, discounted
    USD 4.9bn
    Enterprise value
    USD 6.4bn
    Less net debt
    USD 1.4bn
    Equity value
    USD 5.0bn

    Spread between methods: 2%.

    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%
    5.62%3.954.174.454.845.40
    6.62%3.053.143.243.373.54
    7.62%2.452.472.502.532.57
    8.62%2.042.052.062.072.08
    9.62%1.741.751.761.771.78

    Outlined: this model. Green text: above today's price of 2.87. 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 year5.6%8.2%+2.6pp
    EBIT margin13.3%15.5%+2.2pp
    Discount rate7.6%7.1%-0.5pp
    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.