DCF Studio

    HLMA.L · LSE · Industrials

    Halma plc

    Also onConsensus Drift

    Implied value per share

    GBp 14037.04

    Market price

    GBp 3490.00

    Implied upside

    +302.2%

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

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    GBp 14037.04+302.2%
    Exit multiple
    GBp 2408.31-31.0%
    Market price
    GBp 3490.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m358m715mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 2.9bnGBP 3.2bnGBP 3.6bnGBP 4.0bnGBP 4.5bn+11.7%
    EBITGBP 528.6mGBP 590.4mGBP 659.5mGBP 736.7mGBP 822.9m+11.7%
    NOPATGBP 412.6mGBP 460.9mGBP 514.8mGBP 575.0mGBP 642.3m+11.7%
    Add depreciation & amortisationGBP 152.2mGBP 170.0mGBP 189.8mGBP 212.1mGBP 236.9m+11.7%
    Less capital expenditureGBP -75.0mGBP -83.8mGBP -93.6mGBP -104.6mGBP -116.8m+11.7%
    Less increase in working capitalGBP -30.3mGBP -33.9mGBP -37.8mGBP -42.3mGBP -47.2m+11.7%
    Free cashflow to firmGBP 459.4mGBP 513.1mGBP 573.2mGBP 640.2mGBP 715.2m+11.7%
    Discount factor0.98290.94950.91730.88620.8561-
    Present valueGBP 451.5mGBP 487.2mGBP 525.8mGBP 567.4mGBP 612.3m+7.9%
    Present Value Of The ForecastGBP 2.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.978Reported 0.967, pulled toward 1.0 (Blume)
    Cost of equity9.88%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 0.000.0% of capital
    Total debtGBP 913.4m100.0% of capital, book value as a proxy
    Tax rate21.9%Effective, capped at statutory
    WACC3.51%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 shareGBP 140.37

    95% of EV

    Forecast FCFF, final year
    GBP 715.2m
    Capex at depreciation, working capital in reinvestment
    GBP 749.9m
    Less reinvestment at g/ROIC (21.0% of NOPAT)
    GBP -157.3m
    Capitalised
    GBP 592.6m
    ROIC (reported)
    11.9%
    Terminal value, undiscounted
    GBP 60.0bn
    Terminal value, discounted
    GBP 51.4bn
    Enterprise value
    GBP 54.0bn
    Less net debt
    GBP 770.0m
    Equity value
    GBP 53.2bn

    Exit at 8.0x EBITDA

    Value per shareGBP 24.08

    73% of EV

    Terminal value, undiscounted
    GBP 8.5bn
    Terminal value, discounted
    GBP 7.3bn
    Enterprise value
    GBP 9.9bn
    Less net debt
    GBP 770.0m
    Equity value
    GBP 9.1bn

    Spread between methods: 141%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    1.51%13021.53————
    2.51%160.10298.0111375.01——
    3.51%79.5899.95140.37259.519828.02
    4.51%52.5259.5470.0287.38121.82
    5.51%38.9542.1446.3652.2561.02

    Outlined: this model. Green text: above today's price of 34.90. 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 year11.7%-15.7%-27.4pp
    EBIT margin18.3%2.5%-15.8pp
    Discount rate3.5%6.5%+3.0pp
    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.