DCF Studio

    KDP · NMS · Consumer Defensive

    Keurig Dr Pepper Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 27.95

    Market price

    USD 30.96

    Implied upside

    -9.7%

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

    Value Per Share

    Perpetuity growth
    USD 27.95-9.7%
    Exit multiple
    USD 36.64+18.3%
    Market price
    USD 30.96

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.6bnUSD 18.6bnUSD 19.6bnUSD 20.7bnUSD 21.9bn+5.7%
    EBITUSD 3.7bnUSD 3.9bnUSD 4.2bnUSD 4.4bnUSD 4.7bn+5.7%
    NOPATUSD 2.9bnUSD 3.1bnUSD 3.3bnUSD 3.5bnUSD 3.7bn+5.7%
    Add depreciation & amortisationUSD 843.0mUSD 891.1mUSD 942.0mUSD 995.7mUSD 1.1bn+5.7%
    Less capital expenditureUSD -571.5mUSD -604.1mUSD -638.5mUSD -675.0mUSD -713.5m+5.7%
    Less increase in working capitalUSD -947.3mUSD -1.0bnUSD -1.1bnUSD -1.1bnUSD -1.2bn+5.7%
    Free cashflow to firmUSD 2.3bnUSD 2.4bnUSD 2.5bnUSD 2.7bnUSD 2.8bn+5.7%
    Discount factor0.96620.90190.84200.78600.7337-
    Present valueUSD 2.2bnUSD 2.2bnUSD 2.1bnUSD 2.1bnUSD 2.1bn-1.3%
    Present Value Of The ForecastUSD 10.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.607Reported 0.414, pulled toward 1.0 (Blume)
    Cost of equity8.34%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 42.1bn72.3% of capital
    Total debtUSD 16.1bn27.7% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.12%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 27.95

    80% of EV

    Forecast FCFF, final year
    USD 2.8bn
    Capex at depreciation, working capital in reinvestment
    USD 4.0bn
    Less reinvestment at g/ROIC (35.1% of NOPAT)
    USD -1.4bn
    Capitalised
    USD 2.6bn
    ROIC (WACC floor)
    7.1%
    Terminal value, undiscounted
    USD 58.0bn
    Terminal value, discounted
    USD 42.5bn
    Enterprise value
    USD 53.2bn
    Less net debt
    USD 15.1bn
    Equity value
    USD 38.1bn

    Exit at 13.0x EBITDA

    Value per shareUSD 36.64

    84% of EV

    Terminal value, undiscounted
    USD 74.1bn
    Terminal value, discounted
    USD 54.4bn
    Enterprise value
    USD 65.0bn
    Less net debt
    USD 15.1bn
    Equity value
    USD 49.9bn

    Spread between methods: 27%.

    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%
    5.12%48.0750.6254.0659.0567.00
    6.12%35.1935.7636.4337.2738.36
    7.12%27.6527.8027.9528.1028.26
    8.12%22.5522.6822.8122.9423.07
    9.12%18.5918.7018.8118.9219.03

    Outlined: this model. Green text: above today's price of 30.96. 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%8.2%+2.5pp
    EBIT margin21.2%22.9%+1.7pp
    Discount rate7.1%6.6%-0.5pp
    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.