DCF Studio

    MFC.TO · TOR · Financial Services

    Manulife Financial Corporation

    Also onConsensus Drift

    Implied value per share

    CAD 146.60

    Market price

    CAD 62.06

    Implied upside

    +136.2%

    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.
    AdjustedOnly 2 year(s) of history available to anchor assumptions on.
    AdjustedConsensus rests on as few as 2 analyst estimate(s).
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of -4.8%. 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.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 146.60+136.2%
    Exit multiple
    CAD 7.45-88.0%
    Market price
    CAD 62.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn56bn112bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 79.5bnCAD 119.3bnCAD 178.9bnCAD 268.4bnCAD 402.6bn+50.0%
    EBITCAD 156.0mCAD 234.0mCAD 351.1mCAD 526.6mCAD 789.9m+50.0%
    NOPATCAD 133.3mCAD 199.9mCAD 299.9mCAD 449.8mCAD 674.8m+50.0%
    Add depreciation & amortisationCAD -3.8bnCAD -5.7bnCAD -8.5bnCAD -12.8bnCAD -19.2bn-50.0%
    Less capital expenditureCAD -795.2mCAD -1.2bnCAD -1.8bnCAD -2.7bnCAD -4.0bn+50.0%
    Less increase in working capitalCAD 26.5bnCAD 39.8bnCAD 59.6bnCAD 89.5bnCAD 134.2bn-50.0%
    Free cashflow to firmCAD 22.0bnCAD 33.1bnCAD 49.6bnCAD 74.4bnCAD 111.6bn+50.0%
    Discount factor0.96450.89730.83480.77660.7225-
    Present valueCAD 21.3bnCAD 29.7bnCAD 41.4bnCAD 57.8bnCAD 80.6bn+39.5%
    Present Value Of The ForecastCAD 230.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.839Reported 0.759, pulled toward 1.0 (Blume)
    Cost of equity7.91%Risk-free + beta x equity risk premium
    Cost of debt5.30%Implied cost of debt of 11.3% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationCAD 103.0bn87.5% of capital
    Total debtCAD 14.7bn12.5% of capital, book value as a proxy
    Tax rate14.6%Effective, capped at statutory
    WACC7.49%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 shareCAD 146.60

    3% of EV

    Forecast FCFF, final year
    CAD 111.6bn
    Capex at depreciation, working capital in reinvestment
    CAD 674.8m
    Less reinvestment at g/ROIC (24.3% of NOPAT)
    CAD -164.2m
    Capitalised
    CAD 510.6m
    ROIC (reported)
    10.3%
    Terminal value, undiscounted
    CAD 10.5bn
    Terminal value, discounted
    CAD 7.6bn
    Enterprise value
    CAD 238.4bn
    Less net debt
    CAD -12.0bn
    Equity value
    CAD 250.4bn

    Exit at 17.3x EBITDA

    Value per shareCAD 7.45

    -32792% of EV

    Terminal value, undiscounted
    CAD -318.4bn
    Terminal value, discounted
    CAD -230.1bn
    Enterprise value
    CAD 701.6m
    Less net debt
    CAD -12.0bn
    Equity value
    CAD 12.7bn

    Spread between methods: 181%.

    Sensitivity

    Value per share (CAD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.49%157.15157.72158.46159.50161.06
    6.49%151.36151.64151.98152.41152.99
    7.49%146.29146.43146.60146.80147.05
    8.49%141.70141.77141.85141.94142.05
    9.49%137.46137.49137.52137.56137.60

    Outlined: this model. Green text: above today's price of 62.06. 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 year50.0%30.4%-19.6pp
    EBIT margin0.2%-19.0%-19.2pp
    Discount rate7.5%47.6%+40.1pp
    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.