DCF Studio

    LNW.AX · ASX · Consumer Cyclical

    Light & Wonder, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 152.85

    Market price

    AUD 113.00

    Implied upside

    +35.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 1.4042

    AdjustedReports in USD, trades in AUD. Modelled in USD, converted at the end.

    Value Per Share

    Perpetuity growth
    AUD 152.85+35.3%
    Exit multiple
    AUD 206.00+82.3%
    Market price
    AUD 113.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 3.6bnUSD 4.0bnUSD 4.4bnUSD 4.8bnUSD 5.3bn+9.7%
    EBITUSD 807.1mUSD 885.2mUSD 970.8mUSD 1.1bnUSD 1.2bn+9.7%
    NOPATUSD 644.1mUSD 706.5mUSD 774.8mUSD 849.8mUSD 932.0m+9.7%
    Add depreciation & amortisationUSD 486.4mUSD 533.4mUSD 585.1mUSD 641.7mUSD 703.7m+9.7%
    Less capital expenditureUSD -322.7mUSD -353.9mUSD -388.2mUSD -425.7mUSD -466.9m+9.7%
    Less increase in working capitalUSD -85.2mUSD -93.5mUSD -102.5mUSD -112.4mUSD -123.3m+9.7%
    Free cashflow to firmUSD 722.6mUSD 792.5mUSD 869.2mUSD 953.3mUSD 1.0bn+9.7%
    Discount factor0.96410.89610.83290.77420.7196-
    Present valueUSD 696.6mUSD 710.2mUSD 724.0mUSD 738.0mUSD 752.3m+1.9%
    Present Value Of The ForecastUSD 3.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.589Reported 0.386, pulled toward 1.0 (Blume)
    Cost of equity8.88%Risk-free + beta x equity risk premium
    Cost of debt6.88%Interest expense / average total debt
    Market capitalisationUSD 8.4bn61.9% of capital
    Total debtUSD 5.2bn38.1% of capital, book value as a proxy
    Tax rate20.2%Effective, capped at statutory
    WACC7.59%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 108.85

    75% of EV

    Forecast FCFF, final year
    USD 1.0bn
    Capex at depreciation, working capital in reinvestment
    USD 932.0m
    Less reinvestment at g/ROIC (21.0% of NOPAT)
    USD -195.7m
    Capitalised
    USD 736.2m
    ROIC (reported)
    11.9%
    Terminal value, undiscounted
    USD 14.8bn
    Terminal value, discounted
    USD 10.7bn
    Enterprise value
    USD 14.3bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 9.3bn

    Exit at 10.3x EBITDA

    Value per shareUSD 146.70

    79% of EV

    Terminal value, undiscounted
    USD 19.3bn
    Terminal value, discounted
    USD 13.9bn
    Enterprise value
    USD 17.5bn
    Less net debt
    USD 5.0bn
    Equity value
    USD 12.5bn

    Spread between methods: 30%.

    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%
    5.59%171.69188.45210.52240.99285.87
    6.59%127.78136.51147.30161.01179.03
    7.59%98.25103.10108.85115.77124.31
    8.59%77.0179.7882.9586.6490.98
    9.59%61.0062.5664.3166.2768.51

    Outlined: this model. Green text: above today's price of 80.47. 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 year9.7%4.9%-4.8pp
    EBIT margin22.2%18.4%-3.9pp
    Discount rate7.6%8.7%+1.1pp
    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.