DCF Studio

    MRO.L · LSE · Industrials

    Melrose Industries PLC

    Also onConsensus Drift

    Implied value per share

    GBp 214.39

    Market price

    GBp 478.20

    Implied upside

    -55.2%

    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 214.39-55.2%
    Exit multiple
    GBp 226.52-52.6%
    Market price
    GBp 478.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m113m226mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 3.8bnGBP 4.1bnGBP 4.4bnGBP 4.7bnGBP 5.0bn+6.7%
    EBITGBP 87.7mGBP 93.6mGBP 99.9mGBP 106.6mGBP 113.7m+6.7%
    NOPATGBP 69.4mGBP 74.0mGBP 79.0mGBP 84.3mGBP 89.9m+6.7%
    Add depreciation & amortisationGBP 459.8mGBP 490.6mGBP 523.5mGBP 558.6mGBP 596.1m+6.7%
    Less capital expenditureGBP -114.2mGBP -121.9mGBP -130.1mGBP -138.8mGBP -148.1m+6.7%
    Less increase in working capitalGBP -240.7mGBP -256.8mGBP -274.0mGBP -292.4mGBP -312.0m+6.7%
    Free cashflow to firmGBP 174.3mGBP 185.9mGBP 198.4mGBP 211.7mGBP 225.9m+6.7%
    Discount factor0.95990.88450.81500.75100.6920-
    Present valueGBP 167.3mGBP 164.5mGBP 161.7mGBP 159.0mGBP 156.3m-1.7%
    Present Value Of The ForecastGBP 808.8m

    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
    Beta0.901Reported 0.852, pulled toward 1.0 (Blume)
    Cost of equity9.45%Risk-free + beta x equity risk premium
    Cost of debt7.10%Interest expense / average total debt
    Market capitalisationGBP 6.0bn75.8% of capital
    Total debtGBP 1.9bn24.2% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC8.52%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 2.14

    82% of EV

    Forecast FCFF, final year
    GBP 225.9m
    Capex at depreciation, working capital in reinvestment
    GBP 440.3m
    Less reinvestment at g/ROIC (29.3% of NOPAT)
    GBP -129.1m
    Capitalised
    GBP 311.2m
    ROIC (WACC floor)
    8.5%
    Terminal value, undiscounted
    GBP 5.3bn
    Terminal value, discounted
    GBP 3.7bn
    Enterprise value
    GBP 4.5bn
    Less net debt
    GBP 1.7bn
    Equity value
    GBP 2.7bn

    Exit at 7.8x EBITDA

    Value per shareGBP 2.27

    83% of EV

    Terminal value, undiscounted
    GBP 5.5bn
    Terminal value, discounted
    GBP 3.8bn
    Enterprise value
    GBP 4.6bn
    Less net debt
    GBP 1.7bn
    Equity value
    GBP 2.9bn

    Spread between methods: 5%.

    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%
    6.52%3.343.363.383.403.42
    7.52%2.652.662.682.702.71
    8.52%2.122.132.142.162.17
    9.52%1.701.711.721.741.75
    10.52%1.371.381.391.401.41

    Outlined: this model. Green text: above today's price of 4.78. 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 year6.7%50.2%+43.5pp
    EBIT margin2.3%9.5%+7.2pp
    Discount rate8.5%5.4%-3.1pp
    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.