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    General Dynamics Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 386.48

    Market price

    USD 353.05

    Implied upside

    +9.5%

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

    Value Per Share

    Perpetuity growth
    USD 386.48+9.5%
    Exit multiple
    USD 512.95+45.3%
    Market price
    USD 353.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn7bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 57.8bnUSD 63.7bnUSD 70.1bnUSD 77.1bnUSD 84.9bn+10.1%
    EBITUSD 5.9bnUSD 6.5bnUSD 7.2bnUSD 7.9bnUSD 8.7bn+10.1%
    NOPATUSD 4.9bnUSD 5.4bnUSD 6.0bnUSD 6.6bnUSD 7.2bn+10.1%
    Add depreciation & amortisationUSD 1.1bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.7bn+10.1%
    Less capital expenditureUSD -1.3bnUSD -1.4bnUSD -1.6bnUSD -1.8bnUSD -1.9bn+10.1%
    Less increase in working capitalUSD 210.2mUSD 231.3mUSD 254.6mUSD 280.3mUSD 308.5m-10.1%
    Free cashflow to firmUSD 5.0bnUSD 5.5bnUSD 6.0bnUSD 6.6bnUSD 7.3bn+10.1%
    Discount factor0.96390.89550.83190.77290.7180-
    Present valueUSD 4.8bnUSD 4.9bnUSD 5.0bnUSD 5.1bnUSD 5.2bn+2.3%
    Present Value Of The ForecastUSD 25.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.545Reported 0.321, pulled toward 1.0 (Blume)
    Cost of equity8.00%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 95.5bn90.7% of capital
    Total debtUSD 9.8bn9.3% of capital, book value as a proxy
    Tax rate16.7%Effective, capped at statutory
    WACC7.64%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 386.48

    78% of EV

    Forecast FCFF, final year
    USD 7.3bn
    Capex at depreciation, working capital in reinvestment
    USD 7.7bn
    Less reinvestment at g/ROIC (20.0% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 6.1bn
    ROIC (reported)
    12.5%
    Terminal value, undiscounted
    USD 122.1bn
    Terminal value, discounted
    USD 87.7bn
    Enterprise value
    USD 112.7bn
    Less net debt
    USD 7.5bn
    Equity value
    USD 105.3bn

    Exit at 16.4x EBITDA

    Value per shareUSD 512.95

    83% of EV

    Terminal value, undiscounted
    USD 170.1bn
    Terminal value, discounted
    USD 122.1bn
    Enterprise value
    USD 147.2bn
    Less net debt
    USD 7.5bn
    Equity value
    USD 139.7bn

    Spread between methods: 28%.

    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%
    5.64%542.73585.86642.45720.15833.76
    6.64%432.44455.35483.59519.37566.26
    7.64%358.08371.09386.48405.00427.81
    8.64%304.56312.19320.94331.10343.09
    9.64%264.19268.69273.71279.38285.85

    Outlined: this model. Green text: above today's price of 353.05. 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 year10.1%8.1%-2.0pp
    EBIT margin10.2%9.4%-0.9pp
    Discount rate7.6%8.1%+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.