DCF Studio

    GEHC · NMS · Healthcare

    GE HealthCare Technologies Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 72.60

    Market price

    USD 64.13

    Implied upside

    +13.2%

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

    Value Per Share

    Perpetuity growth
    USD 72.60+13.2%
    Exit multiple
    USD 74.99+16.9%
    Market price
    USD 64.13

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 21.4bnUSD 22.3bnUSD 23.2bnUSD 24.1bnUSD 25.1bn+4.0%
    EBITUSD 2.8bnUSD 3.0bnUSD 3.1bnUSD 3.2bnUSD 3.3bn+4.0%
    NOPATUSD 2.2bnUSD 2.3bnUSD 2.4bnUSD 2.5bnUSD 2.6bn+4.0%
    Add depreciation & amortisationUSD 660.7mUSD 687.1mUSD 714.5mUSD 743.0mUSD 772.6m+4.0%
    Less capital expenditureUSD -431.4mUSD -448.6mUSD -466.5mUSD -485.1mUSD -504.4m+4.0%
    Less increase in working capitalUSD -132.1mUSD -137.4mUSD -142.9mUSD -148.6mUSD -154.5m+4.0%
    Free cashflow to firmUSD 2.3bnUSD 2.4bnUSD 2.5bnUSD 2.6bnUSD 2.7bn+4.0%
    Discount factor0.96100.88760.81970.75710.6992-
    Present valueUSD 2.2bnUSD 2.2bnUSD 2.1bnUSD 2.0bnUSD 1.9bn-4.0%
    Present Value Of The ForecastUSD 10.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.880Reported 0.821, pulled toward 1.0 (Blume)
    Cost of equity9.84%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 29.0bn73.5% of capital
    Total debtUSD 10.5bn26.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.28%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 72.60

    74% of EV

    Forecast FCFF, final year
    USD 2.7bn
    Capex at depreciation, working capital in reinvestment
    USD 3.0bn
    Less reinvestment at g/ROIC (21.8% of NOPAT)
    USD -648.3m
    Capitalised
    USD 2.3bn
    ROIC (reported)
    11.5%
    Terminal value, undiscounted
    USD 41.2bn
    Terminal value, discounted
    USD 28.8bn
    Enterprise value
    USD 39.2bn
    Less net debt
    USD 6.0bn
    Equity value
    USD 33.3bn

    Exit at 10.5x EBITDA

    Value per shareUSD 74.99

    74% of EV

    Terminal value, undiscounted
    USD 42.8bn
    Terminal value, discounted
    USD 29.9bn
    Enterprise value
    USD 40.3bn
    Less net debt
    USD 6.0bn
    Equity value
    USD 34.3bn

    Spread between methods: 3%.

    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%
    6.28%101.85107.87115.44125.25138.51
    7.28%82.4285.6789.5594.30100.24
    8.28%68.7270.5272.6075.0477.95
    9.28%58.5459.5360.6461.9063.34
    10.28%50.6751.1851.7452.3453.00

    Outlined: this model. Green text: above today's price of 64.13. 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 year4.0%1.3%-2.6pp
    EBIT margin13.2%11.8%-1.5pp
    Discount rate8.3%8.9%+0.7pp
    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.