DCF Studio

    EIX · NYQ · Utilities

    Edison International

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 15.69

    Market price

    USD 55.31

    Implied upside

    -71.6%

    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 33.3% of revenue against depreciation of 16.1%. 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 15.69-71.6%
    Exit multiple
    USD 6.37-88.5%
    Market price
    USD 55.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -49854061-249270310FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 20.1bnUSD 20.9bnUSD 21.7bnUSD 22.5bnUSD 23.4bn+3.9%
    EBITUSD 3.5bnUSD 3.6bnUSD 3.7bnUSD 3.9bnUSD 4.0bn+3.9%
    NOPATUSD 3.2bnUSD 3.3bnUSD 3.5bnUSD 3.6bnUSD 3.7bn+3.9%
    Add depreciation & amortisationUSD 3.2bnUSD 3.4bnUSD 3.5bnUSD 3.6bnUSD 3.8bn+3.9%
    Less capital expenditureUSD -6.7bnUSD -6.9bnUSD -7.2bnUSD -7.5bnUSD -7.8bn+3.9%
    Less increase in working capitalUSD 195.0mUSD 202.6mUSD 210.5mUSD 218.7mUSD 227.3m-3.9%
    Free cashflow to firmUSD -42.8mUSD -44.4mUSD -46.2mUSD -48.0mUSD -49.9m-3.9%
    Discount factor0.97060.91440.86150.81170.7647-
    Present valueUSD -41.5mUSD -40.6mUSD -39.8mUSD -38.9mUSD -38.1m+2.1%
    Present Value Of The ForecastUSD -199.0m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.741Reported 0.614, pulled toward 1.0 (Blume)
    Cost of equity9.08%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 21.3bn33.9% of capital
    Total debtUSD 41.5bn66.1% of capital, book value as a proxy
    Tax rate7.1%Effective, capped at statutory
    WACC6.14%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 15.69

    100% of EV

    Forecast FCFF, final year
    USD -49.9m
    Capex at depreciation, working capital in reinvestment
    USD 3.7bn
    Less reinvestment at g/ROIC (40.7% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 2.2bn
    ROIC (WACC floor)
    6.1%
    Terminal value, undiscounted
    USD 62.3bn
    Terminal value, discounted
    USD 47.6bn
    Enterprise value
    USD 47.4bn
    Less net debt
    USD 41.4bn
    Equity value
    USD 6.1bn

    Exit at 7.4x EBITDA

    Value per shareUSD 6.37

    100% of EV

    Terminal value, undiscounted
    USD 57.6bn
    Terminal value, discounted
    USD 44.1bn
    Enterprise value
    USD 43.9bn
    Less net debt
    USD 41.4bn
    Equity value
    USD 2.5bn

    Spread between methods: 84%.

    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%
    4.14%113.11129.38155.09202.61322.76
    5.14%45.7647.1548.7950.8653.73
    6.14%14.4915.0915.6916.2916.90
    7.14%-6.96-6.46-5.96-5.47-4.97
    8.14%-22.94-22.52-22.10-21.69-21.27

    Outlined: this model. Green text: above today's price of 55.31. 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 year3.9%9.4%+5.5pp
    EBIT margin17.2%21.4%+4.2pp
    Discount rate6.1%5.0%-1.1pp
    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.