DCF Studio

    IGG.L · LSE · Financial Services

    IG Group Holdings plc

    Also onConsensus Drift

    Implied value per share

    GBp 1355.36

    Market price

    GBp 1343.00

    Implied upside

    +0.9%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 1355.36+0.9%
    Exit multiple
    GBp 1255.10-6.5%
    Market price
    GBp 1343.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m157m314mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 938.4mGBP 927.8mGBP 917.3mGBP 906.9mGBP 896.7m-1.1%
    EBITGBP 354.0mGBP 350.0mGBP 346.1mGBP 342.1mGBP 338.3m-1.1%
    NOPATGBP 279.0mGBP 275.8mGBP 272.7mGBP 269.6mGBP 266.6m-1.1%
    Add depreciation & amortisationGBP 60.6mGBP 59.9mGBP 59.3mGBP 58.6mGBP 57.9m-1.1%
    Less capital expenditureGBP -16.9mGBP -16.7mGBP -16.5mGBP -16.3mGBP -16.2m-1.1%
    Less increase in working capitalGBP -9.1mGBP -9.0mGBP -8.9mGBP -8.8mGBP -8.7m-1.1%
    Free cashflow to firmGBP 313.6mGBP 310.1mGBP 306.6mGBP 303.1mGBP 299.7m-1.1%
    Discount factor0.96250.89160.82590.76510.7088-
    Present valueGBP 301.8mGBP 276.5mGBP 253.2mGBP 231.9mGBP 212.4m-8.4%
    Present Value Of The ForecastGBP 1.3bn

    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
    Beta0.664Reported 0.498, pulled toward 1.0 (Blume)
    Cost of equity8.15%Risk-free + beta x equity risk premium
    Cost of debt8.10%Interest expense / average total debt
    Market capitalisationGBP 4.4bn88.6% of capital
    Total debtGBP 567.7m11.4% of capital, book value as a proxy
    Tax rate21.2%Effective, capped at statutory
    WACC7.95%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 13.55

    71% of EV

    Forecast FCFF, final year
    GBP 299.7m
    Capex at depreciation, working capital in reinvestment
    GBP 298.1m
    Less reinvestment at g/ROIC (21.3% of NOPAT)
    GBP -63.5m
    Capitalised
    GBP 234.6m
    ROIC (reported)
    11.7%
    Terminal value, undiscounted
    GBP 4.4bn
    Terminal value, discounted
    GBP 3.1bn
    Enterprise value
    GBP 4.4bn
    Less net debt
    GBP -504.0m
    Equity value
    GBP 4.9bn

    Exit at 9.8x EBITDA

    Value per shareGBP 12.55

    68% of EV

    Terminal value, undiscounted
    GBP 3.9bn
    Terminal value, discounted
    GBP 2.8bn
    Enterprise value
    GBP 4.0bn
    Less net debt
    GBP -504.0m
    Equity value
    GBP 4.5bn

    Spread between methods: 8%.

    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%
    5.95%17.7018.6719.9221.5723.89
    6.95%14.8815.4016.0216.8017.80
    7.95%12.9313.2213.5513.9514.44
    8.95%11.4911.6611.8412.0612.30
    9.95%10.4010.4910.5910.7010.82

    Outlined: this model. Green text: above today's price of 13.43. 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 year-1.1%-1.3%-0.2pp
    EBIT margin37.7%37.3%-0.4pp
    Discount rate7.9%8.0%+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.