DCF Studio

    KEY · NYQ · Financial Services

    KeyCorp

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 4.03

    Market price

    USD 20.81

    Implied upside

    -80.6%

    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.

    Value Per Share

    Perpetuity growth
    USD 4.03-80.6%
    Exit multiple
    USD 9.10-56.3%
    Market price
    USD 20.81

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.4bnUSD 7.5bnUSD 7.6bnUSD 7.6bnUSD 7.7bn+1.2%
    EBITUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.5bnUSD 1.5bn+1.2%
    NOPATUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.2bn+1.2%
    Add depreciation & amortisationUSD 124.6mUSD 126.1mUSD 127.7mUSD 129.2mUSD 130.8m+1.2%
    Less capital expenditureUSD -124.8mUSD -126.3mUSD -127.8mUSD -129.4mUSD -131.0m+1.2%
    Less increase in working capitalUSD -8.6mUSD -8.7mUSD -8.8mUSD -8.9mUSD -9.0m+1.2%
    Free cashflow to firmUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.2bnUSD 1.2bn+1.2%
    Discount factor0.95790.87900.80660.74020.6792-
    Present valueUSD 1.1bnUSD 1.0bnUSD 947.7mUSD 880.2mUSD 817.5m-7.1%
    Present Value Of The ForecastUSD 4.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.015Reported 1.023, pulled toward 1.0 (Blume)
    Cost of equity10.58%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 29.7% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 22.2bn66.9% of capital
    Total debtUSD 11.0bn33.1% of capital, book value as a proxy
    Tax rate18.1%Effective, capped at statutory
    WACC8.98%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 4.03

    66% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 1.2bn
    Less reinvestment at g/ROIC (27.8% of NOPAT)
    USD -337.7m
    Capitalised
    USD 875.0m
    ROIC (WACC floor)
    9.0%
    Terminal value, undiscounted
    USD 13.8bn
    Terminal value, discounted
    USD 9.4bn
    Enterprise value
    USD 14.2bn
    Less net debt
    USD 9.7bn
    Equity value
    USD 4.5bn

    Exit at 13.7x EBITDA

    Value per shareUSD 9.10

    76% of EV

    Terminal value, undiscounted
    USD 22.1bn
    Terminal value, discounted
    USD 15.0bn
    Enterprise value
    USD 19.8bn
    Less net debt
    USD 9.7bn
    Equity value
    USD 10.1bn

    Spread between methods: 77%.

    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%
    6.98%7.497.557.617.677.72
    7.98%5.505.555.605.645.69
    8.98%3.953.994.034.074.12
    9.98%2.712.752.782.822.85
    10.98%1.701.731.761.791.82

    Outlined: this model. Green text: above today's price of 20.81. 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 year1.2%23.1%+21.9pp
    EBIT margin19.1%44.2%+25.0pp
    Discount rate9.0%4.5%-4.5pp
    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.