DCF Studio

    ED · NYQ · Utilities

    Consolidated Edison, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 14.02

    Market price

    USD 105.43

    Implied upside

    -86.7%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 29.2% of revenue against depreciation of 13.7%. 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 14.02-86.7%
    Exit multiple
    USD 76.15-27.8%
    Market price
    USD 105.43

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -414710194-2073550970FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.4bnUSD 17.8bnUSD 18.3bnUSD 18.7bnUSD 19.2bn+2.6%
    EBITUSD 3.0bnUSD 3.0bnUSD 3.1bnUSD 3.2bnUSD 3.3bn+2.6%
    NOPATUSD 2.4bnUSD 2.5bnUSD 2.5bnUSD 2.6bnUSD 2.7bn+2.6%
    Add depreciation & amortisationUSD 2.4bnUSD 2.4bnUSD 2.5bnUSD 2.6bnUSD 2.6bn+2.6%
    Less capital expenditureUSD -5.1bnUSD -5.2bnUSD -5.3bnUSD -5.5bnUSD -5.6bn+2.6%
    Less increase in working capitalUSD -85.3mUSD -87.5mUSD -89.8mUSD -92.1mUSD -94.5m+2.6%
    Free cashflow to firmUSD -374.4mUSD -384.1mUSD -394.1mUSD -404.3mUSD -414.7m-2.6%
    Discount factor0.97040.91380.86040.81020.7629-
    Present valueUSD -363.3mUSD -351.0mUSD -339.1mUSD -327.5mUSD -316.4m+3.4%
    Present Value Of The ForecastUSD -1.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.504Reported 0.259, pulled toward 1.0 (Blume)
    Cost of equity7.77%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 39.0bn57.9% of capital
    Total debtUSD 28.4bn42.1% of capital, book value as a proxy
    Tax rate19.2%Effective, capped at statutory
    WACC6.20%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 14.02

    105% of EV

    Forecast FCFF, final year
    USD -414.7m
    Capex at depreciation, working capital in reinvestment
    USD 2.7bn
    Less reinvestment at g/ROIC (40.3% of NOPAT)
    USD -1.1bn
    Capitalised
    USD 1.6bn
    ROIC (WACC floor)
    6.2%
    Terminal value, undiscounted
    USD 43.9bn
    Terminal value, discounted
    USD 33.5bn
    Enterprise value
    USD 31.8bn
    Less net debt
    USD 26.7bn
    Equity value
    USD 5.0bn

    Exit at 12.4x EBITDA

    Value per shareUSD 76.15

    103% of EV

    Terminal value, undiscounted
    USD 73.1bn
    Terminal value, discounted
    USD 55.8bn
    Enterprise value
    USD 54.1bn
    Less net debt
    USD 26.7bn
    Equity value
    USD 27.3bn

    Spread between methods: 138%.

    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%
    4.20%75.8380.9088.56102.06133.96
    5.20%35.5736.1336.7037.2737.83
    6.20%13.1113.5614.0214.4714.93
    7.20%-2.91-2.54-2.16-1.78-1.41
    8.20%-14.86-14.54-14.22-13.91-13.59

    Outlined: this model. Green text: above today's price of 105.43. 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 year2.6%19.1%+16.5pp
    EBIT margin17.1%29.7%+12.6pp
    Discount rate6.2%4.1%-2.1pp
    Download as Excel

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    Yahoo Finance and RBA data. General information, not advice. Methodology.