DCF Studio

    MKS.L · LSE · Consumer Cyclical

    Marks and Spencer Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 727.27

    Market price

    GBp 355.30

    Implied upside

    +104.7%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 727.27+104.7%
    Exit multiple
    GBp 669.82+88.5%
    Market price
    GBp 355.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn1bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 19.5bnGBP 22.1bnGBP 25.0bnGBP 28.3bnGBP 32.0bn+13.1%
    EBITGBP 1.0bnGBP 1.2bnGBP 1.3bnGBP 1.5bnGBP 1.7bn+13.1%
    NOPATGBP 782.8mGBP 885.5mGBP 1.0bnGBP 1.1bnGBP 1.3bn+13.1%
    Add depreciation & amortisationGBP 787.3mGBP 890.6mGBP 1.0bnGBP 1.1bnGBP 1.3bn+13.1%
    Less capital expenditureGBP -685.4mGBP -775.4mGBP -877.2mGBP -992.3mGBP -1.1bn+13.1%
    Less increase in working capitalGBP -100.9mGBP -114.2mGBP -129.2mGBP -146.1mGBP -165.3m+13.1%
    Free cashflow to firmGBP 783.7mGBP 886.5mGBP 1.0bnGBP 1.1bnGBP 1.3bn+13.1%
    Discount factor0.96120.88800.82040.75790.7002-
    Present valueGBP 753.2mGBP 787.2mGBP 822.8mGBP 859.9mGBP 898.7m+4.5%
    Present Value Of The ForecastGBP 4.1bn

    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
    Beta0.990Reported 0.985, pulled toward 1.0 (Blume)
    Cost of equity9.94%Risk-free + beta x equity risk premium
    Cost of debt6.11%Interest expense / average total debt
    Market capitalisationGBP 7.4bn68.3% of capital
    Total debtGBP 3.4bn31.7% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC8.24%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 7.27

    77% of EV

    Forecast FCFF, final year
    GBP 1.3bn
    Capex at depreciation, working capital in reinvestment
    GBP 1.3bn
    Less reinvestment at g/ROIC (14.6% of NOPAT)
    GBP -187.5m
    Capitalised
    GBP 1.1bn
    ROIC (reported)
    17.1%
    Terminal value, undiscounted
    GBP 19.5bn
    Terminal value, discounted
    GBP 13.7bn
    Enterprise value
    GBP 17.8bn
    Less net debt
    GBP 2.4bn
    Equity value
    GBP 15.4bn

    Exit at 5.9x EBITDA

    Value per shareGBP 6.70

    75% of EV

    Terminal value, undiscounted
    GBP 17.8bn
    Terminal value, discounted
    GBP 12.5bn
    Enterprise value
    GBP 16.6bn
    Less net debt
    GBP 2.4bn
    Equity value
    GBP 14.2bn

    Spread between methods: 8%.

    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%
    6.24%9.9110.7011.6912.9914.75
    7.24%7.998.459.029.7110.58
    8.24%6.636.937.277.688.17
    9.24%5.635.826.046.306.60
    10.24%4.864.995.135.305.49

    Outlined: this model. Green text: above today's price of 3.55. 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 year13.1%-1.6%-14.8pp
    EBIT margin5.3%3.0%-2.4pp
    Discount rate8.2%12.9%+4.7pp
    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.