DCF Studio

    LSEG.L · LSE · Financial Services

    London Stock Exchange Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 9299.14

    Market price

    GBp 8246.00

    Implied upside

    +12.8%

    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 9299.14+12.8%
    Exit multiple
    GBp 9445.61+14.5%
    Market price
    GBp 8246.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 10.0bnGBP 10.6bnGBP 11.3bnGBP 12.0bnGBP 12.8bn+6.5%
    EBITGBP 2.0bnGBP 2.1bnGBP 2.2bnGBP 2.4bnGBP 2.5bn+6.5%
    NOPATGBP 1.5bnGBP 1.6bnGBP 1.7bnGBP 1.9bnGBP 2.0bn+6.5%
    Add depreciation & amortisationGBP 2.5bnGBP 2.7bnGBP 2.9bnGBP 3.1bnGBP 3.2bn+6.5%
    Less capital expenditureGBP -1.4bnGBP -1.5bnGBP -1.6bnGBP -1.7bnGBP -1.8bn+6.5%
    Less increase in working capitalGBP -343.4mGBP -365.6mGBP -389.3mGBP -414.5mGBP -441.3m+6.5%
    Free cashflow to firmGBP 2.3bnGBP 2.5bnGBP 2.6bnGBP 2.8bnGBP 3.0bn+6.5%
    Discount factor0.96760.90590.84820.79410.7435-
    Present valueGBP 2.2bnGBP 2.2bnGBP 2.2bnGBP 2.2bnGBP 2.2bn-0.3%
    Present Value Of The ForecastGBP 11.1bn

    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
    Beta0.597Reported 0.399, pulled toward 1.0 (Blume)
    Cost of equity7.79%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 39.8bn77.3% of capital
    Total debtGBP 11.7bn22.7% of capital, book value as a proxy
    Tax rate22.3%Effective, capped at statutory
    WACC6.81%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 92.99

    81% of EV

    Forecast FCFF, final year
    GBP 3.0bn
    Capex at depreciation, working capital in reinvestment
    GBP 4.2bn
    Less reinvestment at g/ROIC (36.7% of NOPAT)
    GBP -1.5bn
    Capitalised
    GBP 2.6bn
    ROIC (WACC floor)
    6.8%
    Terminal value, undiscounted
    GBP 62.9bn
    Terminal value, discounted
    GBP 46.8bn
    Enterprise value
    GBP 57.8bn
    Less net debt
    GBP 8.8bn
    Equity value
    GBP 49.0bn

    Exit at 11.0x EBITDA

    Value per shareGBP 94.46

    81% of EV

    Terminal value, undiscounted
    GBP 63.9bn
    Terminal value, discounted
    GBP 47.5bn
    Enterprise value
    GBP 58.6bn
    Less net debt
    GBP 8.8bn
    Equity value
    GBP 49.8bn

    Spread between methods: 2%.

    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%
    4.81%140.74141.40142.07142.74143.40
    5.81%112.21112.74113.26113.79114.32
    6.81%92.1392.5692.9993.4293.86
    7.81%77.2577.6177.9778.3378.69
    8.81%65.7966.1066.4166.7267.02

    Outlined: this model. Green text: above today's price of 82.46. 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 year6.5%3.9%-2.6pp
    EBIT margin19.9%16.2%-3.7pp
    Discount rate6.8%7.5%+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.