DCF Studio

    EXR · NYQ · Real Estate

    Extra Space Storage Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 127.85

    Market price

    USD 136.71

    Implied upside

    -6.5%

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

    AdjustedReported capital expenditure averages just 0.77% 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 19.99% 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.

    Value Per Share

    Perpetuity growth
    USD 127.85-6.5%
    Exit multiple
    USD 355.94+160.4%
    Market price
    USD 136.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.1bnUSD 4.9bnUSD 5.9bnUSD 7.2bnUSD 8.6bn+20.6%
    EBITUSD 1.9bnUSD 2.3bnUSD 2.8bnUSD 3.4bnUSD 4.1bn+20.6%
    NOPATUSD 1.9bnUSD 2.3bnUSD 2.7bnUSD 3.3bnUSD 4.0bn+20.6%
    Add depreciation & amortisationUSD 814.5mUSD 982.5mUSD 1.2bnUSD 1.4bnUSD 1.7bn+20.6%
    Less capital expenditureUSD -814.5mUSD -982.5mUSD -1.2bnUSD -1.4bnUSD -1.7bn+20.6%
    Less increase in working capitalUSD -2.6mUSD -3.1mUSD -3.8mUSD -4.6mUSD -5.5m+20.6%
    Free cashflow to firmUSD 1.9bnUSD 2.3bnUSD 2.7bnUSD 3.3bnUSD 4.0bn+20.6%
    Discount factor0.95720.87690.80340.73610.6743-
    Present valueUSD 1.8bnUSD 2.0bnUSD 2.2bnUSD 2.4bnUSD 2.7bn+10.5%
    Present Value Of The ForecastUSD 11.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.118Reported 1.176, pulled toward 1.0 (Blume)
    Cost of equity11.15%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 30.2bn68.3% of capital
    Total debtUSD 14.0bn31.7% of capital, book value as a proxy
    Tax rate3.0%Effective, capped at statutory
    WACC9.15%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 127.85

    73% of EV

    Forecast FCFF, final year
    USD 4.0bn
    Capex at depreciation, working capital in reinvestment
    USD 4.0bn
    Less reinvestment at g/ROIC (27.3% of NOPAT)
    USD -1.1bn
    Capitalised
    USD 2.9bn
    ROIC (WACC floor)
    9.2%
    Terminal value, undiscounted
    USD 44.4bn
    Terminal value, discounted
    USD 29.9bn
    Enterprise value
    USD 40.9bn
    Less net debt
    USD 13.9bn
    Equity value
    USD 27.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 355.94

    88% of EV

    Terminal value, undiscounted
    USD 116.0bn
    Terminal value, discounted
    USD 78.2bn
    Enterprise value
    USD 89.3bn
    Less net debt
    USD 13.9bn
    Equity value
    USD 75.4bn

    Spread between methods: 94%.

    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%
    7.15%183.79184.75185.70186.66187.62
    8.15%151.58152.38153.19154.00154.80
    9.15%126.47127.16127.85128.54129.23
    10.15%106.37106.97107.56108.16108.75
    11.15%89.9290.4490.9691.4892.00

    Outlined: this model. Green text: above today's price of 136.71. 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 year20.6%21.8%+1.2pp
    EBIT margin47.3%49.5%+2.2pp
    Discount rate9.2%8.8%-0.4pp
    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.