DCF Studio

    MTB · NYQ · Financial Services

    M&T Bank Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 365.05

    Market price

    USD 227.31

    Implied upside

    +60.6%

    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.

    Value Per Share

    Perpetuity growth
    USD 365.05+60.6%
    Exit multiple
    USD 293.99+29.3%
    Market price
    USD 227.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.2bnUSD 10.9bnUSD 11.6bnUSD 12.3bnUSD 13.1bn+6.3%
    EBITUSD 3.7bnUSD 4.0bnUSD 4.2bnUSD 4.5bnUSD 4.8bn+6.3%
    NOPATUSD 2.9bnUSD 3.1bnUSD 3.3bnUSD 3.5bnUSD 3.8bn+6.3%
    Add depreciation & amortisationUSD 547.7mUSD 582.3mUSD 619.2mUSD 658.3mUSD 700.0m+6.3%
    Less capital expenditureUSD -236.0mUSD -251.0mUSD -266.9mUSD -283.7mUSD -301.7m+6.3%
    Less increase in working capitalUSD 160.1mUSD 170.3mUSD 181.0mUSD 192.5mUSD 204.7m-6.3%
    Free cashflow to firmUSD 3.4bnUSD 3.6bnUSD 3.9bnUSD 4.1bnUSD 4.4bn+6.3%
    Discount factor0.96250.89180.82620.76550.7092-
    Present valueUSD 3.3bnUSD 3.2bnUSD 3.2bnUSD 3.1bnUSD 3.1bn-1.5%
    Present Value Of The ForecastUSD 15.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.707Reported 0.563, pulled toward 1.0 (Blume)
    Cost of equity8.89%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 26.6% 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 capitalisationUSD 32.8bn71.6% of capital
    Total debtUSD 13.0bn28.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.93%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 365.05

    69% of EV

    Forecast FCFF, final year
    USD 4.4bn
    Capex at depreciation, working capital in reinvestment
    USD 4.0bn
    Less reinvestment at g/ROIC (31.5% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 2.7bn
    ROIC (WACC floor)
    7.9%
    Terminal value, undiscounted
    USD 51.1bn
    Terminal value, discounted
    USD 36.3bn
    Enterprise value
    USD 52.2bn
    Less net debt
    USD -5.8bn
    Equity value
    USD 58.0bn

    Exit at 6.5x EBITDA

    Value per shareUSD 293.99

    61% of EV

    Terminal value, undiscounted
    USD 35.2bn
    Terminal value, discounted
    USD 25.0bn
    Enterprise value
    USD 40.9bn
    Less net debt
    USD -5.8bn
    Equity value
    USD 46.7bn

    Spread between methods: 22%.

    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%
    5.93%488.57499.45513.12530.98555.61
    6.93%410.51412.63414.93417.48420.40
    7.93%362.82363.93365.05366.16367.27
    8.93%327.08328.03328.98329.93330.88
    9.93%298.53299.35300.17300.99301.81

    Outlined: this model. Green text: above today's price of 227.31. 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 year6.3%-5.6%-11.9pp
    EBIT margin36.3%19.8%-16.5pp
    Discount rate7.9%13.9%+5.9pp
    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.