DCF Studio

    EMR · NYQ · Industrials

    Emerson Electric Co.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 67.24

    Market price

    USD 149.92

    Implied upside

    -55.1%

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

    Value Per Share

    Perpetuity growth
    USD 67.24-55.1%
    Exit multiple
    USD 161.88+8.0%
    Market price
    USD 149.92

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 19.7bnUSD 21.5bnUSD 23.5bnUSD 25.7bnUSD 28.1bn+9.3%
    EBITUSD 3.5bnUSD 3.8bnUSD 4.1bnUSD 4.5bnUSD 4.9bn+9.3%
    NOPATUSD 2.7bnUSD 3.0bnUSD 3.3bnUSD 3.6bnUSD 3.9bn+9.3%
    Add depreciation & amortisationUSD 1.5bnUSD 1.7bnUSD 1.8bnUSD 2.0bnUSD 2.2bn+9.3%
    Less capital expenditureUSD -460.1mUSD -502.8mUSD -549.5mUSD -600.5mUSD -656.2m+9.3%
    Less increase in working capitalUSD -108.5mUSD -118.6mUSD -129.6mUSD -141.6mUSD -154.8m+9.3%
    Free cashflow to firmUSD 3.7bnUSD 4.0bnUSD 4.4bnUSD 4.8bnUSD 5.3bn+9.3%
    Discount factor0.95210.86310.78250.70930.6430-
    Present valueUSD 3.5bnUSD 3.5bnUSD 3.4bnUSD 3.4bnUSD 3.4bn-0.9%
    Present Value Of The ForecastUSD 17.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.156Reported 1.233, pulled toward 1.0 (Blume)
    Cost of equity11.36%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 83.6bn85.9% of capital
    Total debtUSD 13.8bn14.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.31%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 67.24

    66% of EV

    Forecast FCFF, final year
    USD 5.3bn
    Capex at depreciation, working capital in reinvestment
    USD 5.2bn
    Less reinvestment at g/ROIC (24.2% of NOPAT)
    USD -1.3bn
    Capitalised
    USD 3.9bn
    ROIC (WACC floor)
    10.3%
    Terminal value, undiscounted
    USD 51.4bn
    Terminal value, discounted
    USD 33.1bn
    Enterprise value
    USD 50.3bn
    Less net debt
    USD 12.2bn
    Equity value
    USD 38.1bn

    Exit at 19.0x EBITDA

    Value per shareUSD 161.88

    83% of EV

    Terminal value, undiscounted
    USD 134.9bn
    Terminal value, discounted
    USD 86.7bn
    Enterprise value
    USD 104.0bn
    Less net debt
    USD 12.2bn
    Equity value
    USD 91.7bn

    Spread between methods: 83%.

    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%
    8.31%88.1688.5588.9389.3189.70
    9.31%76.2676.5976.9177.2477.57
    10.31%66.6766.9667.2467.5367.81
    11.31%58.7959.0459.2959.5459.79
    12.31%52.2052.4252.6452.8653.08

    Outlined: this model. Green text: above today's price of 149.92. 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 year9.3%27.2%+17.9pp
    EBIT margin17.5%39.4%+21.8pp
    Discount rate10.3%6.1%-4.2pp
    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.