DCF Studio

    FIX · NYQ · Industrials

    Comfort Systems USA, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 638.69

    Market price

    USD 1651.37

    Implied upside

    -61.3%

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

    Current EV/EBITDA of 39.6x 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 638.69-61.3%
    Exit multiple
    USD 1492.07-9.6%
    Market price
    USD 1651.37

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 11.8bnUSD 15.4bnUSD 20.0bnUSD 26.0bnUSD 33.8bn+30.0%
    EBITUSD 1.2bnUSD 1.5bnUSD 2.0bnUSD 2.5bnUSD 3.3bn+30.0%
    NOPATUSD 915.1mUSD 1.2bnUSD 1.5bnUSD 2.0bnUSD 2.6bn+30.0%
    Add depreciation & amortisationUSD 211.9mUSD 275.5mUSD 358.2mUSD 465.8mUSD 605.6m+30.0%
    Less capital expenditureUSD -185.6mUSD -241.3mUSD -313.7mUSD -407.9mUSD -530.4m+30.0%
    Less increase in working capitalUSD 161.2mUSD 209.6mUSD 272.5mUSD 354.4mUSD 460.8m-30.0%
    Free cashflow to firmUSD 1.1bnUSD 1.4bnUSD 1.9bnUSD 2.4bnUSD 3.2bn+30.0%
    Discount factor0.94110.83340.73810.65370.5789-
    Present valueUSD 1.0bnUSD 1.2bnUSD 1.4bnUSD 1.6bnUSD 1.8bn+15.2%
    Present Value Of The ForecastUSD 7.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.453Reported 1.676, pulled toward 1.0 (Blume)
    Cost of equity12.99%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 58.1bn99.2% of capital
    Total debtUSD 483.4m0.8% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC12.91%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 638.69

    68% of EV

    Forecast FCFF, final year
    USD 3.2bn
    Capex at depreciation, working capital in reinvestment
    USD 2.9bn
    Less reinvestment at g/ROIC (8.6% of NOPAT)
    USD -249.3m
    Capitalised
    USD 2.7bn
    ROIC (reported)
    29.1%
    Terminal value, undiscounted
    USD 26.1bn
    Terminal value, discounted
    USD 15.1bn
    Enterprise value
    USD 22.1bn
    Less net debt
    USD -498.5m
    Equity value
    USD 22.6bn

    Exit at 20.0x EBITDA

    Value per shareUSD 1492.07

    87% of EV

    Terminal value, undiscounted
    USD 78.3bn
    Terminal value, discounted
    USD 45.3bn
    Enterprise value
    USD 52.3bn
    Less net debt
    USD -498.5m
    Equity value
    USD 52.8bn

    Spread between methods: 80%.

    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%
    10.91%747.70769.79794.40822.01853.22
    11.91%673.29689.92708.23728.49751.07
    12.91%612.03624.78638.69653.91670.66
    13.91%560.74570.67581.41593.05605.74
    14.91%517.20525.03533.43542.47552.24

    Outlined: this model. Green text: above today's price of 1651.37. 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 year30.0%59.8%+29.8pp
    EBIT margin9.8%27.8%+18.0pp
    Discount rate12.9%6.6%-6.3pp
    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.