DCF Studio

    GILD · NMS · Healthcare

    Gilead Sciences, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 145.86

    Market price

    USD 150.11

    Implied upside

    -2.8%

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

    Value Per Share

    Perpetuity growth
    USD 145.86-2.8%
    Exit multiple
    USD 149.44-0.4%
    Market price
    USD 150.11

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn6bn12bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 30.2bnUSD 31.0bnUSD 31.8bnUSD 32.6bnUSD 33.4bn+2.6%
    EBITUSD 11.3bnUSD 11.6bnUSD 11.9bnUSD 12.2bnUSD 12.5bn+2.6%
    NOPATUSD 9.0bnUSD 9.3bnUSD 9.5bnUSD 9.8bnUSD 10.0bn+2.6%
    Add depreciation & amortisationUSD 2.8bnUSD 2.8bnUSD 2.9bnUSD 3.0bnUSD 3.1bn+2.6%
    Less capital expenditureUSD -646.1mUSD -662.7mUSD -679.7mUSD -697.2mUSD -715.2m+2.6%
    Less increase in working capitalUSD -407.1mUSD -417.6mUSD -428.3mUSD -439.3mUSD -450.6m+2.6%
    Free cashflow to firmUSD 10.8bnUSD 11.0bnUSD 11.3bnUSD 11.6bnUSD 11.9bn+2.6%
    Discount factor0.96400.89570.83230.77340.7186-
    Present valueUSD 10.4bnUSD 9.9bnUSD 9.4bnUSD 9.0bnUSD 8.6bn-4.7%
    Present Value Of The ForecastUSD 47.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.565Reported 0.350, pulled toward 1.0 (Blume)
    Cost of equity8.10%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 186.1bn88.2% of capital
    Total debtUSD 24.9bn11.8% of capital, book value as a proxy
    Tax rate19.8%Effective, capped at statutory
    WACC7.62%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 145.86

    76% of EV

    Forecast FCFF, final year
    USD 11.9bn
    Capex at depreciation, working capital in reinvestment
    USD 12.1bn
    Less reinvestment at g/ROIC (13.4% of NOPAT)
    USD -1.6bn
    Capitalised
    USD 10.5bn
    ROIC (reported)
    18.7%
    Terminal value, undiscounted
    USD 210.4bn
    Terminal value, discounted
    USD 151.2bn
    Enterprise value
    USD 198.4bn
    Less net debt
    USD 15.3bn
    Equity value
    USD 183.1bn

    Exit at 13.9x EBITDA

    Value per shareUSD 149.44

    77% of EV

    Terminal value, undiscounted
    USD 216.6bn
    Terminal value, discounted
    USD 155.7bn
    Enterprise value
    USD 202.9bn
    Less net debt
    USD 15.3bn
    Equity value
    USD 187.6bn

    Spread between methods: 2%.

    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%
    5.62%198.41217.33242.26276.63327.13
    6.62%158.34169.08182.38199.31221.59
    7.62%131.35137.98145.86155.41167.23
    8.62%111.93116.25121.24127.09134.05
    9.62%97.29100.21103.52107.30111.67

    Outlined: this model. Green text: above today's price of 150.11. 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 year2.6%3.2%+0.7pp
    EBIT margin37.4%38.6%+1.2pp
    Discount rate7.6%7.5%-0.1pp
    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.