DCF Studio

    NOVN.SW · EBS · Healthcare

    Novartis AG

    Also onConsensus Drift

    Implied value per share

    CHF 597.08

    Market price

    CHF 115.10

    Implied upside

    +418.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 0.8218

    AdjustedReports in USD, trades in CHF. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: CHF assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CHF 597.08+418.7%
    Exit multiple
    CHF 158.02+37.3%
    Market price
    CHF 115.10

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn12bn24bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 61.9bnUSD 67.6bnUSD 73.9bnUSD 80.7bnUSD 88.2bn+9.3%
    EBITUSD 15.2bnUSD 16.7bnUSD 18.2bnUSD 19.9bnUSD 21.7bn+9.3%
    NOPATUSD 13.2bnUSD 14.4bnUSD 15.7bnUSD 17.2bnUSD 18.8bn+9.3%
    Add depreciation & amortisationUSD 8.4bnUSD 9.2bnUSD 10.0bnUSD 11.0bnUSD 12.0bn+9.3%
    Less capital expenditureUSD -3.9bnUSD -4.3bnUSD -4.7bnUSD -5.1bnUSD -5.6bn+9.3%
    Less increase in working capitalUSD -731.3mUSD -798.9mUSD -872.9mUSD -953.6mUSD -1.0bn+9.3%
    Free cashflow to firmUSD 16.9bnUSD 18.5bnUSD 20.2bnUSD 22.1bnUSD 24.1bn+9.3%
    Discount factor0.98080.94340.90750.87290.8396-
    Present valueUSD 16.6bnUSD 17.5bnUSD 18.3bnUSD 19.3bnUSD 20.3bn+5.1%
    Present Value Of The ForecastUSD 92.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate0.50%CHF assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.658Reported 0.490, pulled toward 1.0 (Blume)
    Cost of equity4.12%Risk-free + beta x equity risk premium
    Cost of debt3.43%Interest expense / average total debt
    Market capitalisationUSD 218.8bn86.1% of capital
    Total debtUSD 35.4bn13.9% of capital, book value as a proxy
    Tax rate13.5%Effective, capped at statutory
    WACC3.96%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 726.54

    93% of EV

    Forecast FCFF, final year
    USD 24.1bn
    Capex at depreciation, working capital in reinvestment
    USD 27.0bn
    Less reinvestment at g/ROIC (17.3% of NOPAT)
    USD -4.7bn
    Capitalised
    USD 22.4bn
    ROIC (reported)
    14.5%
    Terminal value, undiscounted
    USD 1570.0bn
    Terminal value, discounted
    USD 1318.2bn
    Enterprise value
    USD 1410.2bn
    Less net debt
    USD 23.8bn
    Equity value
    USD 1386.3bn

    Exit at 10.6x EBITDA

    Value per shareUSD 192.28

    76% of EV

    Terminal value, undiscounted
    USD 355.9bn
    Terminal value, discounted
    USD 298.8bn
    Enterprise value
    USD 390.7bn
    Less net debt
    USD 23.8bn
    Equity value
    USD 366.9bn

    Spread between methods: 116%.

    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%
    1.96%2603.93————
    2.96%811.031174.302325.68——
    3.96%475.61569.18726.531047.282063.84
    4.96%334.12372.89427.28509.20646.94
    5.96%256.10275.76300.98334.59381.71

    Outlined: this model. Green text: above today's price of 140.06. 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 year9.3%-21.8%-31.0pp
    EBIT margin24.6%-3.3%-27.9pp
    Discount rate4.0%9.7%+5.7pp
    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.