DCF Studio

    NVR · NYQ · Consumer Cyclical

    NVR, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 6232.48

    Market price

    USD 6150.47

    Implied upside

    +1.3%

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

    AdjustedReported capital expenditure averages just 0.24% 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. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 6232.48+1.3%
    Exit multiple
    USD 5849.86-4.9%
    Market price
    USD 6150.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.3bnUSD 10.2bnUSD 10.1bnUSD 10.1bnUSD 10.0bn-0.6%
    EBITUSD 1.9bnUSD 1.9bnUSD 1.9bnUSD 1.9bnUSD 1.9bn-0.6%
    NOPATUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bn-0.6%
    Add depreciation & amortisationUSD 19.4mUSD 19.2mUSD 19.1mUSD 19.0mUSD 18.9m-0.6%
    Less capital expenditureUSD -102.8mUSD -102.1mUSD -101.5mUSD -100.9mUSD -100.2m-0.6%
    Less increase in working capitalUSD -14.8mUSD -14.7mUSD -14.6mUSD -14.5mUSD -14.4m-0.6%
    Free cashflow to firmUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bn-0.6%
    Discount factor0.95430.86910.79150.72090.6565-
    Present valueUSD 1.4bnUSD 1.2bnUSD 1.1bnUSD 1.0bnUSD 918.5m-9.5%
    Present Value Of The ForecastUSD 5.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.942Reported 0.913, pulled toward 1.0 (Blume)
    Cost of equity10.18%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 16.5bn94.0% of capital
    Total debtUSD 1.1bn6.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.80%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 6232.48

    69% of EV

    Forecast FCFF, final year
    USD 1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 1.5bn
    Less reinvestment at g/ROIC (8.5% of NOPAT)
    USD -127.3m
    Capitalised
    USD 1.4bn
    ROIC (reported)
    29.4%
    Terminal value, undiscounted
    USD 19.2bn
    Terminal value, discounted
    USD 12.6bn
    Enterprise value
    USD 18.3bn
    Less net debt
    USD -863.6m
    Equity value
    USD 19.1bn

    Exit at 9.1x EBITDA

    Value per shareUSD 5849.86

    67% of EV

    Terminal value, undiscounted
    USD 17.4bn
    Terminal value, discounted
    USD 11.4bn
    Enterprise value
    USD 17.1bn
    Less net debt
    USD -863.6m
    Equity value
    USD 18.0bn

    Spread between methods: 6%.

    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%
    7.80%7514.587896.298348.868894.429565.39
    8.80%6560.446821.567123.197475.837893.89
    9.80%5835.896021.816232.456473.256751.38
    10.80%5266.895403.365555.655726.775920.62
    11.80%4808.154910.745023.825149.175289.01

    Outlined: this model. Green text: above today's price of 6150.47. 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-0.6%-0.9%-0.3pp
    EBIT margin18.9%18.6%-0.3pp
    Discount rate9.8%9.9%+0.1pp
    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.