DCF Studio

    EME · NYQ · Industrials

    EMCOR Group, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 528.35

    Market price

    USD 750.09

    Implied upside

    -29.6%

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

    AdjustedReported capital expenditure averages just 0.56% 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. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 528.35-29.6%
    Exit multiple
    USD 944.98+26.0%
    Market price
    USD 750.09

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 19.6bnUSD 22.6bnUSD 26.1bnUSD 30.0bnUSD 34.6bn+15.3%
    EBITUSD 1.5bnUSD 1.7bnUSD 2.0bnUSD 2.3bnUSD 2.6bn+15.3%
    NOPATUSD 1.2bnUSD 1.4bnUSD 1.6bnUSD 1.8bnUSD 2.1bn+15.3%
    Add depreciation & amortisationUSD 193.0mUSD 222.6mUSD 256.7mUSD 296.0mUSD 341.3m+15.3%
    Less capital expenditureUSD -195.9mUSD -225.9mUSD -260.5mUSD -300.4mUSD -346.4m+15.3%
    Less increase in working capitalUSD 245.0mUSD 282.5mUSD 325.8mUSD 375.7mUSD 433.3m-15.3%
    Free cashflow to firmUSD 1.4bnUSD 1.6bnUSD 1.9bnUSD 2.2bnUSD 2.5bn+15.3%
    Discount factor0.94970.85650.77250.69670.6283-
    Present valueUSD 1.4bnUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.6bn+4.0%
    Present Value Of The ForecastUSD 7.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.087Reported 1.130, pulled toward 1.0 (Blume)
    Cost of equity10.98%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 33.1bn98.6% of capital
    Total debtUSD 468.2m1.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.88%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 528.35

    68% of EV

    Forecast FCFF, final year
    USD 2.5bn
    Capex at depreciation, working capital in reinvestment
    USD 2.2bn
    Less reinvestment at g/ROIC (8.1% of NOPAT)
    USD -181.9m
    Capitalised
    USD 2.1bn
    ROIC (reported)
    30.9%
    Terminal value, undiscounted
    USD 25.3bn
    Terminal value, discounted
    USD 15.9bn
    Enterprise value
    USD 23.2bn
    Less net debt
    USD -643.8m
    Equity value
    USD 23.9bn

    Exit at 18.5x EBITDA

    Value per shareUSD 944.98

    83% of EV

    Terminal value, undiscounted
    USD 55.2bn
    Terminal value, discounted
    USD 34.7bn
    Enterprise value
    USD 42.0bn
    Less net debt
    USD -643.8m
    Equity value
    USD 42.7bn

    Spread between methods: 57%.

    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%
    8.88%628.87655.38685.97721.66763.88
    9.88%556.04575.02596.51621.04649.33
    10.88%498.73512.73528.35545.89565.73
    11.88%452.45463.03474.69487.60502.00
    12.88%414.30422.45431.34441.07451.80

    Outlined: this model. Green text: above today's price of 750.09. 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 year15.3%24.4%+9.0pp
    EBIT margin7.6%11.3%+3.7pp
    Discount rate10.9%8.3%-2.6pp
    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.