DCF Studio

    DG · NYQ · Consumer Defensive

    Dollar General Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 168.56

    Market price

    USD 122.41

    Implied upside

    +37.7%

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

    AdjustedCapital expenditure runs at 3.7% of revenue against depreciation of 2.2%. 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 168.56+37.7%
    Exit multiple
    USD 169.52+38.5%
    Market price
    USD 122.41

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 44.5bnUSD 46.3bnUSD 48.2bnUSD 50.2bnUSD 52.3bn+4.1%
    EBITUSD 2.7bnUSD 2.8bnUSD 3.0bnUSD 3.1bnUSD 3.2bn+4.1%
    NOPATUSD 2.2bnUSD 2.2bnUSD 2.3bnUSD 2.4bnUSD 2.5bn+4.1%
    Add depreciation & amortisationUSD 995.5mUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+4.1%
    Less capital expenditureUSD -1.6bnUSD -1.7bnUSD -1.8bnUSD -1.8bnUSD -1.9bn+4.1%
    Less increase in working capitalUSD 527.2mUSD 549.0mUSD 571.6mUSD 595.2mUSD 619.7m-4.1%
    Free cashflow to firmUSD 2.0bnUSD 2.1bnUSD 2.2bnUSD 2.3bnUSD 2.4bn+4.1%
    Discount factor0.96990.91230.85820.80730.7594-
    Present valueUSD 2.0bnUSD 1.9bnUSD 1.9bnUSD 1.9bnUSD 1.8bn-2.1%
    Present Value Of The ForecastUSD 9.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.487Reported 0.235, pulled toward 1.0 (Blume)
    Cost of equity7.68%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 27.0bn63.2% of capital
    Total debtUSD 15.7bn36.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.31%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 168.56

    82% of EV

    Forecast FCFF, final year
    USD 2.4bn
    Capex at depreciation, working capital in reinvestment
    USD 2.5bn
    Less reinvestment at g/ROIC (18.3% of NOPAT)
    USD -462.5m
    Capitalised
    USD 2.1bn
    ROIC (reported)
    13.7%
    Terminal value, undiscounted
    USD 55.7bn
    Terminal value, discounted
    USD 42.3bn
    Enterprise value
    USD 51.8bn
    Less net debt
    USD 14.6bn
    Equity value
    USD 37.2bn

    Exit at 12.8x EBITDA

    Value per shareUSD 169.52

    82% of EV

    Terminal value, undiscounted
    USD 56.0bn
    Terminal value, discounted
    USD 42.5bn
    Enterprise value
    USD 52.0bn
    Less net debt
    USD 14.6bn
    Equity value
    USD 37.4bn

    Spread between methods: 1%.

    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%
    4.31%284.33336.99418.61562.44884.16
    5.31%193.65217.23249.08294.61365.16
    6.31%140.68153.04168.56188.68215.85
    7.31%105.94113.01121.49131.87144.89
    8.31%81.4085.6690.6096.41103.37

    Outlined: this model. Green text: above today's price of 122.41. 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 year4.1%0.3%-3.8pp
    EBIT margin6.1%4.9%-1.2pp
    Discount rate6.3%7.3%+1.0pp
    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.