DCF Studio

    FDXF · NYQ · Industrials

    FedEx Freight Holding Company, Inc.

    Also onConsensus Drift

    Implied value per share

    USD 39.38

    Market price

    USD 120.13

    Implied upside

    -67.2%

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

    Value Per Share

    Perpetuity growth
    USD 39.38-67.2%
    Exit multiple
    USD 83.99-30.1%
    Market price
    USD 120.13

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m337m674mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 8.4bnUSD 8.0bnUSD 7.7bnUSD 7.3bnUSD 7.0bn-4.5%
    EBITUSD 1.4bnUSD 1.3bnUSD 1.2bnUSD 1.2bnUSD 1.1bn-4.5%
    NOPATUSD 1.1bnUSD 1.0bnUSD 983.3mUSD 939.5mUSD 897.6m-4.5%
    Add depreciation & amortisationUSD 376.2mUSD 359.4mUSD 343.4mUSD 328.1mUSD 313.5m-4.5%
    Less capital expenditureUSD -412.8mUSD -394.4mUSD -376.8mUSD -360.0mUSD -344.0m-4.5%
    Less increase in working capitalUSD -366.4mUSD -350.1mUSD -334.5mUSD -319.6mUSD -305.3m-4.5%
    Free cashflow to firmUSD 674.2mUSD 644.2mUSD 615.5mUSD 588.0mUSD 561.8m-4.5%
    Discount factor0.95880.88140.81020.74480.6846-
    Present valueUSD 646.4mUSD 567.7mUSD 498.6mUSD 437.9mUSD 384.6m-12.2%
    Present Value Of The ForecastUSD 2.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.000As reported
    Cost of equity10.50%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 18.0bn73.8% of capital
    Total debtUSD 6.4bn26.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.78%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 39.38

    79% of EV

    Forecast FCFF, final year
    USD 561.8m
    Capex at depreciation, working capital in reinvestment
    USD 897.6m
    Less reinvestment at g/ROIC (5.6% of NOPAT)
    USD -49.9m
    Capitalised
    USD 847.7m
    ROIC (reported)
    45.0%
    Terminal value, undiscounted
    USD 13.8bn
    Terminal value, discounted
    USD 9.5bn
    Enterprise value
    USD 12.0bn
    Less net debt
    USD 6.1bn
    Equity value
    USD 5.9bn

    Exit at 16.3x EBITDA

    Value per shareUSD 83.99

    86% of EV

    Terminal value, undiscounted
    USD 23.6bn
    Terminal value, discounted
    USD 16.1bn
    Enterprise value
    USD 18.7bn
    Less net debt
    USD 6.1bn
    Equity value
    USD 12.6bn

    Spread between methods: 72%.

    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%
    6.78%59.7667.8277.7590.30106.65
    7.78%43.3248.6254.9262.5271.88
    8.78%31.4335.1239.3844.3850.31
    9.78%22.4425.1128.1431.6135.63
    10.78%15.4117.4119.6422.1625.01

    Outlined: this model. Green text: above today's price of 120.13. 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-4.5%6.5%+11.0pp
    EBIT margin16.2%30.7%+14.5pp
    Discount rate8.8%5.7%-3.1pp
    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.