DCF Studio

    FITB · NYQ · Financial Services

    Fifth Third Bancorp

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 34.79

    Market price

    USD 52.91

    Implied upside

    -34.2%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.

    Value Per Share

    Perpetuity growth
    USD 34.79-34.2%
    Exit multiple
    USD 68.59+29.6%
    Market price
    USD 52.91

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 9.1bnUSD 9.3bnUSD 9.6bnUSD 9.9bnUSD 10.2bn+2.9%
    EBITUSD 3.3bnUSD 3.4bnUSD 3.5bnUSD 3.6bnUSD 3.7bn+2.9%
    NOPATUSD 2.6bnUSD 2.7bnUSD 2.8bnUSD 2.8bnUSD 2.9bn+2.9%
    Add depreciation & amortisationUSD 524.6mUSD 539.7mUSD 555.2mUSD 571.2mUSD 587.6m+2.9%
    Less capital expenditureUSD -626.5mUSD -644.6mUSD -663.1mUSD -682.1mUSD -701.8m+2.9%
    Less increase in working capitalUSD 253.6mUSD 260.9mUSD 268.4mUSD 276.1mUSD 284.0m-2.9%
    Free cashflow to firmUSD 2.8bnUSD 2.8bnUSD 2.9bnUSD 3.0bnUSD 3.1bn+2.9%
    Discount factor0.95730.87720.80380.73650.6749-
    Present valueUSD 2.6bnUSD 2.5bnUSD 2.3bnUSD 2.2bnUSD 2.1bn-5.7%
    Present Value Of The ForecastUSD 11.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.942Reported 0.913, pulled toward 1.0 (Blume)
    Cost of equity10.18%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 24.2% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 48.0bn77.5% of capital
    Total debtUSD 14.0bn22.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.13%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 34.79

    65% of EV

    Forecast FCFF, final year
    USD 3.1bn
    Capex at depreciation, working capital in reinvestment
    USD 2.9bn
    Less reinvestment at g/ROIC (27.4% of NOPAT)
    USD -798.5m
    Capitalised
    USD 2.1bn
    ROIC (WACC floor)
    9.1%
    Terminal value, undiscounted
    USD 32.7bn
    Terminal value, discounted
    USD 22.1bn
    Enterprise value
    USD 33.9bn
    Less net debt
    USD 10.5bn
    Equity value
    USD 23.4bn

    Exit at 15.5x EBITDA

    Value per shareUSD 68.59

    79% of EV

    Terminal value, undiscounted
    USD 66.4bn
    Terminal value, discounted
    USD 44.8bn
    Enterprise value
    USD 56.6bn
    Less net debt
    USD 10.5bn
    Equity value
    USD 46.1bn

    Spread between methods: 65%.

    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%
    7.13%48.0148.2348.4548.6848.90
    8.13%40.4140.5940.7840.9741.16
    9.13%34.4734.6334.7934.9535.11
    10.13%29.7029.8429.9830.1230.26
    11.13%25.7925.9126.0426.1626.28

    Outlined: this model. Green text: above today's price of 52.91. 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 year2.9%9.0%+6.2pp
    EBIT margin36.3%49.6%+13.3pp
    Discount rate9.1%6.7%-2.4pp
    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.