DCF Studio

    HUBB · NYQ · Industrials

    Hubbell Incorporated

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 208.41

    Market price

    USD 446.92

    Implied upside

    -53.4%

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

    Value Per Share

    Perpetuity growth
    USD 208.41-53.4%
    Exit multiple
    USD 412.44-7.7%
    Market price
    USD 446.92

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.2bnUSD 6.5bnUSD 6.9bnUSD 7.3bnUSD 7.7bn+5.7%
    EBITUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+5.7%
    NOPATUSD 897.5mUSD 948.8mUSD 1.0bnUSD 1.1bnUSD 1.1bn+5.7%
    Add depreciation & amortisationUSD 202.1mUSD 213.6mUSD 225.8mUSD 238.7mUSD 252.3m+5.7%
    Less capital expenditureUSD -178.5mUSD -188.7mUSD -199.5mUSD -210.8mUSD -222.9m+5.7%
    Less increase in working capitalUSD -32.6mUSD -34.5mUSD -36.5mUSD -38.5mUSD -40.7m+5.7%
    Free cashflow to firmUSD 888.5mUSD 939.2mUSD 992.8mUSD 1.0bnUSD 1.1bn+5.7%
    Discount factor0.95560.87270.79690.72780.6646-
    Present valueUSD 849.0mUSD 819.6mUSD 791.2mUSD 763.8mUSD 737.3m-3.5%
    Present Value Of The ForecastUSD 4.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.926Reported 0.889, pulled toward 1.0 (Blume)
    Cost of equity10.09%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 23.6bn90.5% of capital
    Total debtUSD 2.5bn9.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.50%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 208.41

    70% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (15.8% of NOPAT)
    USD -177.1m
    Capitalised
    USD 943.6m
    ROIC (reported)
    15.8%
    Terminal value, undiscounted
    USD 13.8bn
    Terminal value, discounted
    USD 9.2bn
    Enterprise value
    USD 13.1bn
    Less net debt
    USD 2.0bn
    Equity value
    USD 11.2bn

    Exit at 18.1x EBITDA

    Value per shareUSD 412.44

    84% of EV

    Terminal value, undiscounted
    USD 30.2bn
    Terminal value, discounted
    USD 20.1bn
    Enterprise value
    USD 24.1bn
    Less net debt
    USD 2.0bn
    Equity value
    USD 22.1bn

    Spread between methods: 66%.

    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%
    7.50%271.75285.17301.17320.62344.80
    8.50%228.86237.31247.10258.57272.25
    9.50%196.67202.18208.41215.53223.77
    10.50%171.62175.28179.35183.90189.05
    11.50%151.56154.02156.70159.66162.93

    Outlined: this model. Green text: above today's price of 446.92. 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%23.6%+17.9pp
    EBIT margin18.4%36.2%+17.8pp
    Discount rate9.5%6.0%-3.6pp
    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.