DCF Studio

    MCO · NYQ · Financial Services

    Moody's Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 217.32

    Market price

    USD 468.59

    Implied upside

    -53.6%

    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.

    Current EV/EBITDA of 21.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 217.32-53.6%
    Exit multiple
    USD 488.94+4.3%
    Market price
    USD 468.59

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 8.7bnUSD 9.7bnUSD 10.9bnUSD 12.2bnUSD 13.7bn+12.2%
    EBITUSD 3.5bnUSD 3.9bnUSD 4.4bnUSD 4.9bnUSD 5.5bn+12.2%
    NOPATUSD 2.8bnUSD 3.1bnUSD 3.5bnUSD 3.9bnUSD 4.4bn+12.2%
    Add depreciation & amortisationUSD 533.7mUSD 598.7mUSD 671.6mUSD 753.3mUSD 845.0m+12.2%
    Less capital expenditureUSD -399.4mUSD -448.0mUSD -502.5mUSD -563.7mUSD -632.4m+12.2%
    Less increase in working capitalUSD -79.7mUSD -89.4mUSD -100.3mUSD -112.5mUSD -126.2m+12.2%
    Free cashflow to firmUSD 2.8bnUSD 3.1bnUSD 3.5bnUSD 4.0bnUSD 4.4bn+12.2%
    Discount factor0.94880.85410.76890.69220.6232-
    Present valueUSD 2.7bnUSD 2.7bnUSD 2.7bnUSD 2.7bnUSD 2.8bn+1.0%
    Present Value Of The ForecastUSD 13.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.224Reported 1.334, pulled toward 1.0 (Blume)
    Cost of equity11.73%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 81.2bn91.7% of capital
    Total debtUSD 7.4bn8.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.08%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 217.32

    69% of EV

    Forecast FCFF, final year
    USD 4.4bn
    Capex at depreciation, working capital in reinvestment
    USD 4.7bn
    Less reinvestment at g/ROIC (13.0% of NOPAT)
    USD -611.5m
    Capitalised
    USD 4.1bn
    ROIC (reported)
    19.2%
    Terminal value, undiscounted
    USD 48.8bn
    Terminal value, discounted
    USD 30.4bn
    Enterprise value
    USD 44.0bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 39.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 488.94

    85% of EV

    Terminal value, undiscounted
    USD 127.2bn
    Terminal value, discounted
    USD 79.3bn
    Enterprise value
    USD 92.9bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 88.0bn

    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%
    9.08%269.76279.68291.03304.18319.59
    10.08%234.80241.64249.31258.01267.96
    11.08%207.17211.99217.32223.25229.92
    12.08%184.78188.24192.01196.15200.73
    13.08%166.28168.79171.49174.42177.61

    Outlined: this model. Green text: above today's price of 468.59. 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 year12.2%31.5%+19.4pp
    EBIT margin40.2%84.0%+43.8pp
    Discount rate11.1%6.7%-4.4pp
    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.