DCF Studio

    NXT.L · LSE · Consumer Cyclical

    NEXT plc

    Also onConsensus Drift

    Implied value per share

    GBp 15713.55

    Market price

    GBp 14210.00

    Implied upside

    +10.6%

    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 15713.55+10.6%
    Exit multiple
    GBp 19312.77+35.9%
    Market price
    GBp 14210.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 7.7bnGBP 8.5bnGBP 9.5bnGBP 10.5bnGBP 11.7bn+11.1%
    EBITGBP 1.4bnGBP 1.5bnGBP 1.7bnGBP 1.9bnGBP 2.1bn+11.1%
    NOPATGBP 1.1bnGBP 1.2bnGBP 1.3bnGBP 1.5bnGBP 1.6bn+11.1%
    Add depreciation & amortisationGBP 339.4mGBP 377.0mGBP 418.8mGBP 465.3mGBP 516.9m+11.1%
    Less capital expenditureGBP -256.3mGBP -284.7mGBP -316.3mGBP -351.3mGBP -390.3m+11.1%
    Less increase in working capitalGBP -72.5mGBP -80.5mGBP -89.5mGBP -99.4mGBP -110.4m+11.1%
    Free cashflow to firmGBP 1.1bnGBP 1.2bnGBP 1.3bnGBP 1.5bnGBP 1.6bn+11.1%
    Discount factor0.95550.87220.79630.72690.6636-
    Present valueGBP 1.0bnGBP 1.0bnGBP 1.1bnGBP 1.1bnGBP 1.1bn+1.4%
    Present Value Of The ForecastGBP 5.3bn

    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
    Beta1.027Reported 1.041, pulled toward 1.0 (Blume)
    Cost of equity10.15%Risk-free + beta x equity risk premium
    Cost of debt5.29%Interest expense / average total debt
    Market capitalisationGBP 16.2bn90.0% of capital
    Total debtGBP 1.8bn10.0% of capital, book value as a proxy
    Tax rate22.9%Effective, capped at statutory
    WACC9.54%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 157.14

    74% of EV

    Forecast FCFF, final year
    GBP 1.6bn
    Capex at depreciation, working capital in reinvestment
    GBP 1.7bn
    Less reinvestment at g/ROIC (7.3% of NOPAT)
    GBP -123.2m
    Capitalised
    GBP 1.6bn
    ROIC (reported)
    34.3%
    Terminal value, undiscounted
    GBP 22.8bn
    Terminal value, discounted
    GBP 15.1bn
    Enterprise value
    GBP 20.4bn
    Less net debt
    GBP 1.7bn
    Equity value
    GBP 18.7bn

    Exit at 11.1x EBITDA

    Value per shareGBP 193.13

    79% of EV

    Terminal value, undiscounted
    GBP 29.3bn
    Terminal value, discounted
    GBP 19.4bn
    Enterprise value
    GBP 24.7bn
    Less net debt
    GBP 1.7bn
    Equity value
    GBP 23.0bn

    Spread between methods: 21%.

    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%
    7.54%196.52209.48224.97243.85267.36
    8.54%166.36175.18185.43197.51211.96
    9.54%143.72149.99157.13165.35174.90
    10.54%126.11130.72135.88141.72148.36
    11.54%112.02115.49119.34123.62128.42

    Outlined: this model. Green text: above today's price of 142.10. 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 year11.1%8.7%-2.3pp
    EBIT margin18.1%16.5%-1.6pp
    Discount rate9.5%10.2%+0.7pp
    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.