DCF Studio

    GM · NYQ · Consumer Cyclical

    General Motors Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -13.40

    Market price

    USD 82.20

    Implied upside

    -116.3%

    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 13.8% of revenue against depreciation of 7.2%. 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 -13.40-116.3%
    Exit multiple
    USD 97.52+18.6%
    Market price
    USD 82.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -6834630916-34173154580FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 195.5bnUSD 206.7bnUSD 218.4bnUSD 230.8bnUSD 243.9bn+5.7%
    EBITUSD 10.0bnUSD 10.5bnUSD 11.1bnUSD 11.8bnUSD 12.4bn+5.7%
    NOPATUSD 8.6bnUSD 9.1bnUSD 9.6bnUSD 10.2bnUSD 10.7bn+5.7%
    Add depreciation & amortisationUSD 14.0bnUSD 14.8bnUSD 15.6bnUSD 16.5bnUSD 17.5bn+5.7%
    Less capital expenditureUSD -27.0bnUSD -28.6bnUSD -30.2bnUSD -31.9bnUSD -33.7bn+5.7%
    Less increase in working capitalUSD -1.0bnUSD -1.1bnUSD -1.2bnUSD -1.2bnUSD -1.3bn+5.7%
    Free cashflow to firmUSD -5.5bnUSD -5.8bnUSD -6.1bnUSD -6.5bnUSD -6.8bn-5.7%
    Discount factor0.96680.90370.84480.78960.7381-
    Present valueUSD -5.3bnUSD -5.2bnUSD -5.2bnUSD -5.1bnUSD -5.0bn+1.2%
    Present Value Of The ForecastUSD -25.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.215Reported 1.321, pulled toward 1.0 (Blume)
    Cost of equity11.68%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 74.3bn36.2% of capital
    Total debtUSD 131.3bn63.8% of capital, book value as a proxy
    Tax rate13.6%Effective, capped at statutory
    WACC6.98%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 -13.40

    129% of EV

    Forecast FCFF, final year
    USD -6.8bn
    Capex at depreciation, working capital in reinvestment
    USD 10.7bn
    Less reinvestment at g/ROIC (35.8% of NOPAT)
    USD -3.8bn
    Capitalised
    USD 6.9bn
    ROIC (WACC floor)
    7.0%
    Terminal value, undiscounted
    USD 157.8bn
    Terminal value, discounted
    USD 116.5bn
    Enterprise value
    USD 90.6bn
    Less net debt
    USD 103.6bn
    Equity value
    USD -13.0bn

    Exit at 10.2x EBITDA

    Value per shareUSD 97.52

    113% of EV

    Terminal value, undiscounted
    USD 304.0bn
    Terminal value, discounted
    USD 224.4bn
    Enterprise value
    USD 198.5bn
    Less net debt
    USD 103.6bn
    Equity value
    USD 94.9bn

    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%
    4.98%46.4647.3548.2449.1350.02
    5.98%10.5911.3012.0112.7213.43
    6.98%-14.57-13.99-13.40-12.82-12.23
    7.98%-33.07-32.58-32.09-31.60-31.11
    8.98%-47.15-46.73-46.31-45.89-45.48

    Outlined: this model. Green text: above today's price of 82.20. 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 year5.7%22.4%+16.8pp
    EBIT margin5.1%8.1%+3.0pp
    Discount rate7.0%4.5%-2.5pp
    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.