DCF Studio

    LHX · NYQ · Industrials

    L3Harris Technologies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 221.08

    Market price

    USD 247.29

    Implied upside

    -10.6%

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

    Value Per Share

    Perpetuity growth
    USD 221.08-10.6%
    Exit multiple
    USD 348.63+41.0%
    Market price
    USD 247.29

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 23.7bnUSD 25.8bnUSD 28.0bnUSD 30.4bnUSD 33.1bn+8.6%
    EBITUSD 2.4bnUSD 2.6bnUSD 2.8bnUSD 3.0bnUSD 3.3bn+8.6%
    NOPATUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.7bnUSD 2.9bn+8.6%
    Add depreciation & amortisationUSD 1.4bnUSD 1.5bnUSD 1.6bnUSD 1.8bnUSD 1.9bn+8.6%
    Less capital expenditureUSD -453.7mUSD -492.8mUSD -535.3mUSD -581.4mUSD -631.5m+8.6%
    Less increase in working capitalUSD -121.5mUSD -132.0mUSD -143.4mUSD -155.7mUSD -169.2m+8.6%
    Free cashflow to firmUSD 2.9bnUSD 3.2bnUSD 3.4bnUSD 3.7bnUSD 4.0bn+8.6%
    Discount factor0.96280.89250.82740.76700.7110-
    Present valueUSD 2.8bnUSD 2.8bnUSD 2.8bnUSD 2.9bnUSD 2.9bn+0.7%
    Present Value Of The ForecastUSD 14.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.669Reported 0.506, pulled toward 1.0 (Blume)
    Cost of equity8.68%Risk-free + beta x equity risk premium
    Cost of debt5.11%Interest expense / average total debt
    Market capitalisationUSD 46.0bn80.6% of capital
    Total debtUSD 11.1bn19.4% of capital, book value as a proxy
    Tax rate11.0%Effective, capped at statutory
    WACC7.88%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 221.08

    73% of EV

    Forecast FCFF, final year
    USD 4.0bn
    Capex at depreciation, working capital in reinvestment
    USD 4.1bn
    Less reinvestment at g/ROIC (31.7% of NOPAT)
    USD -1.3bn
    Capitalised
    USD 2.8bn
    ROIC (WACC floor)
    7.9%
    Terminal value, undiscounted
    USD 52.8bn
    Terminal value, discounted
    USD 37.5bn
    Enterprise value
    USD 51.7bn
    Less net debt
    USD 10.0bn
    Equity value
    USD 41.7bn

    Exit at 16.6x EBITDA

    Value per shareUSD 348.63

    81% of EV

    Terminal value, undiscounted
    USD 86.6bn
    Terminal value, discounted
    USD 61.5bn
    Enterprise value
    USD 75.7bn
    Less net debt
    USD 10.0bn
    Equity value
    USD 65.7bn

    Spread between methods: 45%.

    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%
    5.88%314.16316.09318.19320.52323.25
    6.88%259.28260.44261.60262.76263.92
    7.88%219.14220.11221.08222.05223.02
    8.88%188.08188.91189.74190.56191.39
    9.88%163.35164.06164.78165.49166.20

    Outlined: this model. Green text: above today's price of 247.29. 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 year8.6%10.9%+2.3pp
    EBIT margin10.0%11.3%+1.3pp
    Discount rate7.9%7.2%-0.7pp
    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.