DCF Studio

    DHI · NYQ · Consumer Cyclical

    D.R. Horton, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 144.85

    Market price

    USD 138.02

    Implied upside

    +5.0%

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

    AdjustedReported capital expenditure averages just 0.43% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.3%. 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 144.85+5.0%
    Exit multiple
    USD 160.86+16.5%
    Market price
    USD 138.02

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 34.5bnUSD 34.8bnUSD 35.0bnUSD 35.3bnUSD 35.6bn+0.8%
    EBITUSD 5.9bnUSD 6.0bnUSD 6.0bnUSD 6.1bnUSD 6.1bn+0.8%
    NOPATUSD 4.7bnUSD 4.7bnUSD 4.8bnUSD 4.8bnUSD 4.8bn+0.8%
    Add depreciation & amortisationUSD 89.2mUSD 89.9mUSD 90.6mUSD 91.3mUSD 91.9m+0.8%
    Less capital expenditureUSD -345.1mUSD -347.7mUSD -350.4mUSD -353.1mUSD -355.7m+0.8%
    Less increase in working capitalUSD -95.9mUSD -96.6mUSD -97.3mUSD -98.1mUSD -98.8m+0.8%
    Free cashflow to firmUSD 4.3bnUSD 4.4bnUSD 4.4bnUSD 4.4bnUSD 4.5bn+0.8%
    Discount factor0.94910.85500.77020.69380.6250-
    Present valueUSD 4.1bnUSD 3.7bnUSD 3.4bnUSD 3.1bnUSD 2.8bn-9.2%
    Present Value Of The ForecastUSD 17.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.249Reported 1.371, pulled toward 1.0 (Blume)
    Cost of equity11.87%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 38.6bn86.5% of capital
    Total debtUSD 6.0bn13.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.01%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 144.85

    64% of EV

    Forecast FCFF, final year
    USD 4.5bn
    Capex at depreciation, working capital in reinvestment
    USD 4.8bn
    Less reinvestment at g/ROIC (15.5% of NOPAT)
    USD -747.6m
    Capitalised
    USD 4.1bn
    ROIC (reported)
    16.2%
    Terminal value, undiscounted
    USD 49.3bn
    Terminal value, discounted
    USD 30.8bn
    Enterprise value
    USD 47.9bn
    Less net debt
    USD 3.0bn
    Equity value
    USD 44.9bn

    Exit at 9.2x EBITDA

    Value per shareUSD 160.86

    68% of EV

    Terminal value, undiscounted
    USD 57.2bn
    Terminal value, discounted
    USD 35.8bn
    Enterprise value
    USD 52.9bn
    Less net debt
    USD 3.0bn
    Equity value
    USD 49.8bn

    Spread between methods: 10%.

    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%
    9.01%177.73182.92188.86195.73203.78
    10.01%156.64160.08163.94168.31173.30
    11.01%139.97142.30144.86147.70150.88
    12.01%126.47128.05129.76131.63133.68
    13.01%115.31116.37117.51118.74120.06

    Outlined: this model. Green text: above today's price of 138.02. 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 year0.8%-0.7%-1.4pp
    EBIT margin17.2%16.5%-0.7pp
    Discount rate11.0%11.4%+0.4pp
    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.