DCF Studio

    MDT · NYQ · Healthcare

    Medtronic plc

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 68.47

    Market price

    USD 92.13

    Implied upside

    -25.7%

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

    Value Per Share

    Perpetuity growth
    USD 68.47-25.7%
    Exit multiple
    USD 103.00+11.8%
    Market price
    USD 92.13

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn7bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 38.3bnUSD 40.3bnUSD 42.3bnUSD 44.6bnUSD 46.9bn+5.2%
    EBITUSD 7.1bnUSD 7.4bnUSD 7.8bnUSD 8.2bnUSD 8.7bn+5.2%
    NOPATUSD 5.6bnUSD 5.9bnUSD 6.2bnUSD 6.5bnUSD 6.9bn+5.2%
    Add depreciation & amortisationUSD 3.2bnUSD 3.4bnUSD 3.5bnUSD 3.7bnUSD 3.9bn+5.2%
    Less capital expenditureUSD -1.9bnUSD -2.0bnUSD -2.2bnUSD -2.3bnUSD -2.4bn+5.2%
    Less increase in working capitalUSD -953.2mUSD -1.0bnUSD -1.1bnUSD -1.1bnUSD -1.2bn+5.2%
    Free cashflow to firmUSD 5.9bnUSD 6.2bnUSD 6.5bnUSD 6.9bnUSD 7.2bn+5.2%
    Discount factor0.96240.89130.82550.76450.7081-
    Present valueUSD 5.7bnUSD 5.5bnUSD 5.4bnUSD 5.2bnUSD 5.1bn-2.6%
    Present Value Of The ForecastUSD 26.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.715Reported 0.574, pulled toward 1.0 (Blume)
    Cost of equity8.93%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 117.8bn80.8% of capital
    Total debtUSD 28.0bn19.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.97%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 68.47

    75% of EV

    Forecast FCFF, final year
    USD 7.2bn
    Capex at depreciation, working capital in reinvestment
    USD 8.8bn
    Less reinvestment at g/ROIC (31.4% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 6.0bn
    ROIC (WACC floor)
    8.0%
    Terminal value, undiscounted
    USD 113.0bn
    Terminal value, discounted
    USD 80.0bn
    Enterprise value
    USD 106.9bn
    Less net debt
    USD 18.7bn
    Equity value
    USD 88.2bn

    Exit at 14.0x EBITDA

    Value per shareUSD 103.00

    82% of EV

    Terminal value, undiscounted
    USD 175.8bn
    Terminal value, discounted
    USD 124.5bn
    Enterprise value
    USD 151.4bn
    Less net debt
    USD 18.7bn
    Equity value
    USD 132.7bn

    Spread between methods: 40%.

    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%
    5.97%98.72100.21102.01104.28107.31
    6.97%80.1880.5480.9081.2681.62
    7.97%67.8768.1768.4768.7769.08
    8.97%58.3358.5858.8459.1059.36
    9.97%50.7250.9551.1751.3951.62

    Outlined: this model. Green text: above today's price of 92.13. 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 year5.2%12.3%+7.1pp
    EBIT margin18.5%24.9%+6.4pp
    Discount rate8.0%6.3%-1.7pp
    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.