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    EXPD · NYQ · Industrials

    Expeditors International of Washington, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 45.91

    Market price

    USD 190.94

    Implied upside

    -76.0%

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

    AdjustedReported capital expenditure averages just 0.45% 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. 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.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.5%. 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.

    Current EV/EBITDA of 21.7x 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 45.91-76.0%
    Exit multiple
    USD 75.50-60.5%
    Market price
    USD 190.94

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m375m751mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 9.6bnUSD 8.3bnUSD 7.2bnUSD 6.2bnUSD 5.4bn-13.4%
    EBITUSD 961.1mUSD 831.8mUSD 720.0mUSD 623.2mUSD 539.4m-13.4%
    NOPATUSD 759.2mUSD 657.1mUSD 568.8mUSD 492.3mUSD 426.1m-13.4%
    Add depreciation & amortisationUSD 51.6mUSD 44.6mUSD 38.6mUSD 33.4mUSD 28.9m-13.4%
    Less capital expenditureUSD -95.8mUSD -82.9mUSD -71.8mUSD -62.1mUSD -53.8m-13.4%
    Less increase in working capitalUSD 35.6mUSD 30.8mUSD 26.7mUSD 23.1mUSD 20.0m+13.4%
    Free cashflow to firmUSD 750.6mUSD 649.7mUSD 562.3mUSD 486.7mUSD 421.2m-13.4%
    Discount factor0.95090.85980.77740.70290.6356-
    Present valueUSD 713.7mUSD 558.6mUSD 437.1mUSD 342.1mUSD 267.7m-21.7%
    Present Value Of The ForecastUSD 2.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.039Reported 1.058, pulled toward 1.0 (Blume)
    Cost of equity10.71%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 24.8bn97.8% of capital
    Total debtUSD 570.6m2.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.60%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 45.91

    58% of EV

    Forecast FCFF, final year
    USD 421.2m
    Capex at depreciation, working capital in reinvestment
    USD 426.1m
    Less reinvestment at g/ROIC (6.9% of NOPAT)
    USD -29.5m
    Capitalised
    USD 396.6m
    ROIC (reported)
    36.2%
    Terminal value, undiscounted
    USD 5.0bn
    Terminal value, discounted
    USD 3.2bn
    Enterprise value
    USD 5.5bn
    Less net debt
    USD -743.7m
    Equity value
    USD 6.3bn

    Exit at 20.0x EBITDA

    Value per shareUSD 75.50

    76% of EV

    Terminal value, undiscounted
    USD 11.4bn
    Terminal value, discounted
    USD 7.2bn
    Enterprise value
    USD 9.5bn
    Less net debt
    USD -743.7m
    Equity value
    USD 10.3bn

    Spread between methods: 49%.

    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%
    8.60%52.7154.6556.9059.5562.71
    9.60%47.6849.0750.6452.4554.55
    10.60%43.7444.7645.9147.2048.67
    11.60%40.5741.3442.2043.1544.22
    12.60%37.9638.5639.2139.9340.73

    Outlined: this model. Green text: above today's price of 190.94. 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 year-13.4%24.2%+37.7pp
    EBIT margin10.0%45.8%+35.8pp
    Discount rate10.6%4.0%-6.6pp
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    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

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