DCF Studio

    DLR · NYQ · Real Estate

    Digital Realty Trust, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -2.00

    Market price

    USD 182.12

    Implied upside

    -101.1%

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

    AdjustedReported capital expenditure averages just 0.00% 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 31.87% 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.

    Current EV/EBITDA of 30.2x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD -2.00-101.1%
    Exit multiple
    USD 33.46-81.6%
    Market price
    USD 182.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.7bnUSD 7.3bnUSD 8.0bnUSD 8.7bnUSD 9.5bn+9.2%
    EBITUSD 936.3mUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.3bn+9.2%
    NOPATUSD 866.0mUSD 945.8mUSD 1.0bnUSD 1.1bnUSD 1.2bn+9.2%
    Add depreciation & amortisationUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.8bnUSD 3.0bn+9.2%
    Less capital expenditureUSD -2.1bnUSD -2.3bnUSD -2.5bnUSD -2.8bnUSD -3.0bn+9.2%
    Less increase in working capitalUSD 37.6mUSD 41.1mUSD 44.9mUSD 49.0mUSD 53.6m-9.2%
    Free cashflow to firmUSD 903.6mUSD 986.9mUSD 1.1bnUSD 1.2bnUSD 1.3bn+9.2%
    Discount factor0.95650.87510.80070.73260.6703-
    Present valueUSD 864.3mUSD 863.7mUSD 863.1mUSD 862.4mUSD 861.8m-0.1%
    Present Value Of The ForecastUSD 4.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.025Reported 1.037, pulled toward 1.0 (Blume)
    Cost of equity10.63%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 68.8bn77.8% of capital
    Total debtUSD 19.7bn22.2% of capital, book value as a proxy
    Tax rate7.5%Effective, capped at statutory
    WACC9.30%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 -2.00

    68% of EV

    Forecast FCFF, final year
    USD 1.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.2bn
    Less reinvestment at g/ROIC (26.9% of NOPAT)
    USD -331.3m
    Capitalised
    USD 900.9m
    ROIC (WACC floor)
    9.3%
    Terminal value, undiscounted
    USD 13.6bn
    Terminal value, discounted
    USD 9.1bn
    Enterprise value
    USD 13.4bn
    Less net debt
    USD 16.2bn
    Equity value
    USD -2.8bn

    Exit at 20.0x EBITDA

    Value per shareUSD 33.46

    93% of EV

    Terminal value, undiscounted
    USD 87.2bn
    Terminal value, discounted
    USD 58.4bn
    Enterprise value
    USD 62.8bn
    Less net debt
    USD 16.2bn
    Equity value
    USD 46.6bn

    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%
    7.30%0.570.620.660.710.75
    8.30%-0.90-0.87-0.83-0.79-0.76
    9.30%-2.06-2.03-2.00-1.97-1.94
    10.30%-3.00-2.97-2.94-2.92-2.89
    11.30%-3.77-3.74-3.72-3.69-3.67

    Outlined: this model. Green text: above today's price of 182.12. Shading: distance from this model's own value.

    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.