DCF Studio

    MO · NYQ · Consumer Defensive

    Altria Group, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 78.19

    Market price

    USD 69.52

    Implied upside

    +12.5%

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

    AdjustedReported capital expenditure averages just 0.93% 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.

    Value Per Share

    Perpetuity growth
    USD 78.19+12.5%
    Exit multiple
    USD 63.49-8.7%
    Market price
    USD 69.52

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 20.0bnUSD 19.8bnUSD 19.6bnUSD 19.4bnUSD 19.3bn-0.9%
    EBITUSD 11.5bnUSD 11.4bnUSD 11.3bnUSD 11.2bnUSD 11.1bn-0.9%
    NOPATUSD 9.1bnUSD 9.0bnUSD 8.9bnUSD 8.8bnUSD 8.8bn-0.9%
    Add depreciation & amortisationUSD 256.4mUSD 254.1mUSD 251.9mUSD 249.6mUSD 247.4m-0.9%
    Less capital expenditureUSD -199.6mUSD -197.8mUSD -196.0mUSD -194.3mUSD -192.6m-0.9%
    Less increase in working capitalUSD 44.8mUSD 44.4mUSD 44.0mUSD 43.6mUSD 43.2m+0.9%
    Free cashflow to firmUSD 9.2bnUSD 9.1bnUSD 9.0bnUSD 8.9bnUSD 8.9bn-0.9%
    Discount factor0.96320.89370.82910.76920.7137-
    Present valueUSD 8.9bnUSD 8.1bnUSD 7.5bnUSD 6.9bnUSD 6.3bn-8.0%
    Present Value Of The ForecastUSD 37.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.661Reported 0.494, pulled toward 1.0 (Blume)
    Cost of equity8.63%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 116.1bn81.9% of capital
    Total debtUSD 25.7bn18.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.78%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 78.19

    75% of EV

    Forecast FCFF, final year
    USD 8.9bn
    Capex at depreciation, working capital in reinvestment
    USD 8.9bn
    Less reinvestment at g/ROIC (6.1% of NOPAT)
    USD -540.3m
    Capitalised
    USD 8.3bn
    ROIC (reported)
    41.0%
    Terminal value, undiscounted
    USD 161.3bn
    Terminal value, discounted
    USD 115.1bn
    Enterprise value
    USD 152.8bn
    Less net debt
    USD 21.2bn
    Equity value
    USD 131.6bn

    Exit at 11.2x EBITDA

    Value per shareUSD 63.49

    71% of EV

    Terminal value, undiscounted
    USD 126.7bn
    Terminal value, discounted
    USD 90.4bn
    Enterprise value
    USD 128.1bn
    Less net debt
    USD 21.2bn
    Equity value
    USD 106.9bn

    Spread between methods: 21%.

    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%
    5.78%104.06115.56130.55150.90180.15
    6.78%82.7689.7198.27109.08123.18
    7.78%68.2272.7878.1984.7292.77
    8.78%57.6760.8364.4968.7773.85
    9.78%49.6651.9454.5357.5060.93

    Outlined: this model. Green text: above today's price of 69.52. 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-0.9%-3.2%-2.3pp
    EBIT margin57.6%52.1%-5.6pp
    Discount rate7.8%8.4%+0.6pp
    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.