DCF Studio

    FSV.TO · TOR · Real Estate

    FirstService Corporation

    Also onConsensus Drift

    Implied value per share

    CAD 201.45

    Market price

    CAD 179.85

    Implied upside

    +12.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.3982

    AdjustedReports in USD, trades in CAD. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 201.45+12.0%
    Exit multiple
    CAD 376.13+109.1%
    Market price
    CAD 179.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m279m558mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.2bnUSD 7.1bnUSD 8.1bnUSD 9.2bnUSD 10.4bn+13.6%
    EBITUSD 385.4mUSD 438.0mUSD 497.8mUSD 565.7mUSD 642.8m+13.6%
    NOPATUSD 283.3mUSD 321.9mUSD 365.9mUSD 415.8mUSD 472.5m+13.6%
    Add depreciation & amortisationUSD 194.1mUSD 220.6mUSD 250.7mUSD 284.9mUSD 323.8m+13.6%
    Less capital expenditureUSD -135.8mUSD -154.4mUSD -175.4mUSD -199.3mUSD -226.5m+13.6%
    Less increase in working capitalUSD -7.2mUSD -8.1mUSD -9.3mUSD -10.5mUSD -12.0m+13.6%
    Free cashflow to firmUSD 334.4mUSD 380.0mUSD 431.9mUSD 490.8mUSD 557.8m+13.6%
    Discount factor0.96350.89450.83050.77100.7158-
    Present valueUSD 322.2mUSD 340.0mUSD 358.7mUSD 378.4mUSD 399.3m+5.5%
    Present Value Of The ForecastUSD 1.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.932Reported 0.898, pulled toward 1.0 (Blume)
    Cost of equity8.42%Risk-free + beta x equity risk premium
    Cost of debt5.00%Interest expense / average total debt
    Market capitalisationUSD 7.9bn85.0% of capital
    Total debtUSD 1.4bn15.0% of capital, book value as a proxy
    Tax rate26.5%Effective, capped at statutory
    WACC7.71%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 144.08

    77% of EV

    Forecast FCFF, final year
    USD 557.8m
    Capex at depreciation, working capital in reinvestment
    USD 574.8m
    Less reinvestment at g/ROIC (25.6% of NOPAT)
    USD -147.0m
    Capitalised
    USD 427.9m
    ROIC (reported)
    9.8%
    Terminal value, undiscounted
    USD 8.4bn
    Terminal value, discounted
    USD 6.0bn
    Enterprise value
    USD 7.8bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 6.6bn

    Exit at 17.0x EBITDA

    Value per shareUSD 269.01

    87% of EV

    Terminal value, undiscounted
    USD 16.4bn
    Terminal value, discounted
    USD 11.7bn
    Enterprise value
    USD 13.5bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 12.3bn

    Spread between methods: 60%.

    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%
    5.71%214.03228.29246.83272.02308.38
    6.71%168.03174.90183.28193.80207.45
    7.71%136.83140.18144.07148.70154.32
    8.71%114.28115.78117.45119.33121.49
    9.71%97.2397.7098.1898.6799.16

    Outlined: this model. Green text: above today's price of 128.63. 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 year13.6%11.3%-2.4pp
    EBIT margin6.2%5.5%-0.7pp
    Discount rate7.7%8.2%+0.5pp
    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.