DCF Studio

    HII · NYQ · Industrials

    Huntington Ingalls Industries, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 237.70

    Market price

    USD 272.86

    Implied upside

    -12.9%

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

    Value Per Share

    Perpetuity growth
    USD 237.70-12.9%
    Exit multiple
    USD 350.87+28.6%
    Market price
    USD 272.86

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m344m687mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 13.2bnUSD 13.9bnUSD 14.6bnUSD 15.4bnUSD 16.2bn+5.4%
    EBITUSD 672.3mUSD 708.3mUSD 746.2mUSD 786.1mUSD 828.2m+5.4%
    NOPATUSD 539.0mUSD 567.9mUSD 598.3mUSD 630.3mUSD 664.1m+5.4%
    Add depreciation & amortisationUSD 389.5mUSD 410.3mUSD 432.3mUSD 455.4mUSD 479.8m+5.4%
    Less capital expenditureUSD -381.8mUSD -402.2mUSD -423.8mUSD -446.4mUSD -470.3m+5.4%
    Less increase in working capitalUSD 11.3mUSD 11.9mUSD 12.5mUSD 13.2mUSD 13.9m-5.4%
    Free cashflow to firmUSD 558.0mUSD 587.8mUSD 619.3mUSD 652.5mUSD 687.4m+5.4%
    Discount factor0.96730.90520.84700.79260.7417-
    Present valueUSD 539.8mUSD 532.1mUSD 524.6mUSD 517.2mUSD 509.9m-1.4%
    Present Value Of The ForecastUSD 2.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.481Reported 0.225, pulled toward 1.0 (Blume)
    Cost of equity7.64%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 10.8bn78.6% of capital
    Total debtUSD 2.9bn21.4% of capital, book value as a proxy
    Tax rate19.8%Effective, capped at statutory
    WACC6.87%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 237.70

    77% of EV

    Forecast FCFF, final year
    USD 687.4m
    Capex at depreciation, working capital in reinvestment
    USD 800.7m
    Less reinvestment at g/ROIC (36.4% of NOPAT)
    USD -291.6m
    Capitalised
    USD 509.1m
    ROIC (WACC floor)
    6.9%
    Terminal value, undiscounted
    USD 12.0bn
    Terminal value, discounted
    USD 8.9bn
    Enterprise value
    USD 11.5bn
    Less net debt
    USD 2.1bn
    Equity value
    USD 9.3bn

    Exit at 13.7x EBITDA

    Value per shareUSD 350.87

    84% of EV

    Terminal value, undiscounted
    USD 18.0bn
    Terminal value, discounted
    USD 13.3bn
    Enterprise value
    USD 15.9bn
    Less net debt
    USD 2.1bn
    Equity value
    USD 13.8bn

    Spread between methods: 38%.

    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%
    4.87%395.10417.77449.48497.50579.75
    5.87%294.21299.53306.06314.43325.83
    6.87%235.50236.60237.70238.80239.90
    7.87%197.57198.50199.42200.34201.26
    8.87%168.27169.06169.84170.63171.41

    Outlined: this model. Green text: above today's price of 272.86. 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 year5.4%8.0%+2.6pp
    EBIT margin5.1%5.8%+0.7pp
    Discount rate6.9%6.2%-0.6pp
    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.