DCF Studio

    FERG · NYQ · Industrials

    Ferguson Enterprises Inc.

    Also onConsensus Drift

    Implied value per share

    USD 131.39

    Market price

    USD 214.43

    Implied upside

    -38.7%

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

    Value Per Share

    Perpetuity growth
    USD 131.39-38.7%
    Exit multiple
    USD 205.80-4.0%
    Market price
    USD 214.43

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 31.5bnUSD 32.3bnUSD 33.1bnUSD 34.0bnUSD 34.8bn+2.5%
    EBITUSD 2.9bnUSD 3.0bnUSD 3.1bnUSD 3.1bnUSD 3.2bn+2.5%
    NOPATUSD 2.3bnUSD 2.4bnUSD 2.4bnUSD 2.5bnUSD 2.5bn+2.5%
    Add depreciation & amortisationUSD 352.8mUSD 361.7mUSD 370.7mUSD 380.0mUSD 389.5m+2.5%
    Less capital expenditureUSD -374.0mUSD -383.4mUSD -393.0mUSD -402.8mUSD -412.9m+2.5%
    Less increase in working capitalUSD 217.2mUSD 222.7mUSD 228.2mUSD 233.9mUSD 239.8m-2.5%
    Free cashflow to firmUSD 2.5bnUSD 2.6bnUSD 2.6bnUSD 2.7bnUSD 2.8bn+2.5%
    Discount factor0.95330.86640.78740.71550.6503-
    Present valueUSD 2.4bnUSD 2.2bnUSD 2.1bnUSD 1.9bnUSD 1.8bn-6.8%
    Present Value Of The ForecastUSD 10.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.075Reported 1.112, pulled toward 1.0 (Blume)
    Cost of equity10.91%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 41.5bn87.4% of capital
    Total debtUSD 6.0bn12.6% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.04%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 131.39

    67% of EV

    Forecast FCFF, final year
    USD 2.8bn
    Capex at depreciation, working capital in reinvestment
    USD 2.7bn
    Less reinvestment at g/ROIC (10.6% of NOPAT)
    USD -282.4m
    Capitalised
    USD 2.4bn
    ROIC (reported)
    23.6%
    Terminal value, undiscounted
    USD 32.4bn
    Terminal value, discounted
    USD 21.1bn
    Enterprise value
    USD 31.5bn
    Less net debt
    USD 5.3bn
    Equity value
    USD 26.2bn

    Exit at 15.3x EBITDA

    Value per shareUSD 205.80

    78% of EV

    Terminal value, undiscounted
    USD 55.2bn
    Terminal value, discounted
    USD 35.9bn
    Enterprise value
    USD 46.3bn
    Less net debt
    USD 5.3bn
    Equity value
    USD 41.0bn

    Spread between methods: 44%.

    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%
    8.04%165.33174.06184.33196.60211.53
    9.04%141.07147.01153.83161.75171.07
    10.04%122.47126.67131.39136.76142.93
    11.04%107.76110.80114.18117.95122.20
    12.04%95.8298.08100.55103.27106.29

    Outlined: this model. Green text: above today's price of 214.43. 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 year2.5%11.0%+8.5pp
    EBIT margin9.3%14.4%+5.2pp
    Discount rate10.0%7.3%-2.7pp
    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.