DCF Studio

    MAS · NYQ · Industrials

    Masco Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 33.34

    Market price

    USD 68.06

    Implied upside

    -51.0%

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

    AdjustedCapital expenditure runs at 2.5% of revenue against depreciation of 1.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 33.34-51.0%
    Exit multiple
    USD 40.84-40.0%
    Market price
    USD 68.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m403m805mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.2bnUSD 6.9bnUSD 6.6bnUSD 6.3bnUSD 6.0bn-4.5%
    EBITUSD 1.2bnUSD 1.1bnUSD 1.1bnUSD 1.0bnUSD 996.5m-4.5%
    NOPATUSD 946.2mUSD 903.7mUSD 863.1mUSD 824.3mUSD 787.3m-4.5%
    Add depreciation & amortisationUSD 133.9mUSD 127.9mUSD 122.1mUSD 116.6mUSD 111.4m-4.5%
    Less capital expenditureUSD -177.7mUSD -169.7mUSD -162.1mUSD -154.8mUSD -147.8m-4.5%
    Less increase in working capitalUSD -97.1mUSD -92.7mUSD -88.5mUSD -84.6mUSD -80.8m-4.5%
    Free cashflow to firmUSD 805.3mUSD 769.1mUSD 734.6mUSD 701.6mUSD 670.1m-4.5%
    Discount factor0.95300.86550.78610.71390.6484-
    Present valueUSD 767.5mUSD 665.7mUSD 577.4mUSD 500.9mUSD 434.5m-13.3%
    Present Value Of The ForecastUSD 2.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.197Reported 1.294, pulled toward 1.0 (Blume)
    Cost of equity11.58%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 13.4bn80.7% of capital
    Total debtUSD 3.2bn19.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.11%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 33.34

    69% of EV

    Forecast FCFF, final year
    USD 670.1m
    Capex at depreciation, working capital in reinvestment
    USD 810.4m
    Less reinvestment at g/ROIC (6.5% of NOPAT)
    USD -52.4m
    Capitalised
    USD 757.9m
    ROIC (reported)
    38.6%
    Terminal value, undiscounted
    USD 10.2bn
    Terminal value, discounted
    USD 6.6bn
    Enterprise value
    USD 9.6bn
    Less net debt
    USD 2.6bn
    Equity value
    USD 7.0bn

    Exit at 11.4x EBITDA

    Value per shareUSD 40.84

    74% of EV

    Terminal value, undiscounted
    USD 12.6bn
    Terminal value, discounted
    USD 8.2bn
    Enterprise value
    USD 11.1bn
    Less net debt
    USD 2.6bn
    Equity value
    USD 8.6bn

    Spread between methods: 20%.

    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%
    8.11%42.5145.4348.8552.9457.91
    9.11%35.5337.5739.9242.6545.86
    10.11%30.1631.6533.3435.2537.45
    11.11%25.9227.0428.2829.6831.25
    12.11%22.4823.3424.2825.3326.49

    Outlined: this model. Green text: above today's price of 68.06. 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 year-4.5%6.9%+11.4pp
    EBIT margin16.6%28.8%+12.2pp
    Discount rate10.1%6.7%-3.4pp
    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.