DCF Studio

    FLEX · NMS · Technology

    Flex Ltd.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 17.37

    Market price

    USD 108.51

    Implied upside

    -84.0%

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

    Current EV/EBITDA of 20.9x 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 17.37-84.0%
    Exit multiple
    USD 56.35-48.1%
    Market price
    USD 108.51

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m451m902mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 27.7bnUSD 27.5bnUSD 27.3bnUSD 27.1bnUSD 27.0bn-0.7%
    EBITUSD 1.2bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bn-0.7%
    NOPATUSD 945.9mUSD 939.3mUSD 932.8mUSD 926.4mUSD 919.9m-0.7%
    Add depreciation & amortisationUSD 547.2mUSD 543.4mUSD 539.6mUSD 535.9mUSD 532.2m-0.7%
    Less capital expenditureUSD -568.2mUSD -564.3mUSD -560.4mUSD -556.5mUSD -552.6m-0.7%
    Less increase in working capitalUSD -23.2mUSD -23.1mUSD -22.9mUSD -22.8mUSD -22.6m-0.7%
    Free cashflow to firmUSD 901.6mUSD 895.4mUSD 889.2mUSD 883.0mUSD 876.9m-0.7%
    Discount factor0.94470.84300.75230.67140.5991-
    Present valueUSD 851.7mUSD 754.8mUSD 668.9mUSD 592.8mUSD 525.4m-11.4%
    Present Value Of The ForecastUSD 3.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.438Reported 1.654, pulled toward 1.0 (Blume)
    Cost of equity12.91%Risk-free + beta x equity risk premium
    Cost of debt5.08%Interest expense / average total debt
    Market capitalisationUSD 40.1bn90.3% of capital
    Total debtUSD 4.3bn9.7% of capital, book value as a proxy
    Tax rate18.1%Effective, capped at statutory
    WACC12.06%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 17.37

    60% of EV

    Forecast FCFF, final year
    USD 876.9m
    Capex at depreciation, working capital in reinvestment
    USD 1.0bn
    Less reinvestment at g/ROIC (20.7% of NOPAT)
    USD -207.6m
    Capitalised
    USD 793.7m
    ROIC (WACC floor)
    12.1%
    Terminal value, undiscounted
    USD 8.5bn
    Terminal value, discounted
    USD 5.1bn
    Enterprise value
    USD 8.5bn
    Less net debt
    USD 1.9bn
    Equity value
    USD 6.6bn

    Exit at 20.0x EBITDA

    Value per shareUSD 56.35

    85% of EV

    Terminal value, undiscounted
    USD 33.1bn
    Terminal value, discounted
    USD 19.8bn
    Enterprise value
    USD 23.2bn
    Less net debt
    USD 1.9bn
    Equity value
    USD 21.3bn

    Spread between methods: 106%.

    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%
    10.06%21.6721.7721.8821.9922.10
    11.06%19.2319.3119.3819.4619.53
    12.06%17.2417.3117.3717.4417.50
    13.06%15.5515.6115.6715.7315.79
    14.06%14.1114.1614.2214.2714.32

    Outlined: this model. Green text: above today's price of 108.51. 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-0.7%36.3%+37.0pp
    EBIT margin4.2%21.6%+17.4pp
    Discount rate12.1%4.2%-7.9pp
    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.