DCF Studio

    FSLR · NMS · Technology

    First Solar, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 98.44

    Market price

    USD 195.96

    Implied upside

    -49.8%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 32.3% of revenue against depreciation of 9.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 98.44-49.8%
    Exit multiple
    USD 200.37+2.2%
    Market price
    USD 195.96

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -2486087022-12430435110FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.6bnUSD 8.3bnUSD 10.4bnUSD 13.1bnUSD 16.5bn+25.8%
    EBITUSD 1.3bnUSD 1.6bnUSD 2.1bnUSD 2.6bnUSD 3.3bn+25.8%
    NOPATUSD 1.2bnUSD 1.5bnUSD 1.9bnUSD 2.4bnUSD 3.0bn+25.8%
    Add depreciation & amortisationUSD 653.3mUSD 822.1mUSD 1.0bnUSD 1.3bnUSD 1.6bn+25.8%
    Less capital expenditureUSD -2.1bnUSD -2.7bnUSD -3.4bnUSD -4.2bnUSD -5.3bn+25.8%
    Less increase in working capitalUSD -733.9mUSD -923.6mUSD -1.2bnUSD -1.5bnUSD -1.8bn+25.8%
    Free cashflow to firmUSD -991.5mUSD -1.2bnUSD -1.6bnUSD -2.0bnUSD -2.5bn-25.8%
    Discount factor0.94080.83270.73700.65240.5774-
    Present valueUSD -932.8mUSD -1.0bnUSD -1.2bnUSD -1.3bnUSD -1.4bn-11.4%
    Present Value Of The ForecastUSD -5.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.491Reported 1.733, pulled toward 1.0 (Blume)
    Cost of equity13.20%Risk-free + beta x equity risk premium
    Cost of debt6.42%Interest expense / average total debt
    Market capitalisationUSD 21.1bn97.0% of capital
    Total debtUSD 655.3m3.0% of capital, book value as a proxy
    Tax rate7.5%Effective, capped at statutory
    WACC12.98%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 98.44

    170% of EV

    Forecast FCFF, final year
    USD -2.5bn
    Capex at depreciation, working capital in reinvestment
    USD 3.0bn
    Less reinvestment at g/ROIC (17.0% of NOPAT)
    USD -515.7m
    Capitalised
    USD 2.5bn
    ROIC (reported)
    14.7%
    Terminal value, undiscounted
    USD 24.7bn
    Terminal value, discounted
    USD 14.2bn
    Enterprise value
    USD 8.4bn
    Less net debt
    USD -2.2bn
    Equity value
    USD 10.6bn

    Exit at 8.9x EBITDA

    Value per shareUSD 200.37

    130% of EV

    Terminal value, undiscounted
    USD 43.6bn
    Terminal value, discounted
    USD 25.2bn
    Enterprise value
    USD 19.3bn
    Less net debt
    USD -2.2bn
    Equity value
    USD 21.5bn

    Spread between methods: 68%.

    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%
    10.98%133.24136.77140.64144.93149.70
    11.98%112.33114.60117.05119.70122.61
    12.98%95.5296.9498.44100.04101.74
    13.98%81.7982.6383.4984.3885.30
    14.98%70.6571.1571.6572.1672.66

    Outlined: this model. Green text: above today's price of 195.96. 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 year25.8%50.2%+24.3pp
    EBIT margin19.9%29.7%+9.8pp
    Discount rate13.0%9.3%-3.6pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.