DCF Studio

    ODFL · NMS · Industrials

    Old Dominion Freight Line, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 44.28

    Market price

    USD 173.00

    Implied upside

    -74.4%

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

    AdjustedCapital expenditure runs at 11.5% of revenue against depreciation of 5.6%. 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.

    Current EV/EBITDA of 20.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 44.28-74.4%
    Exit multiple
    USD 99.24-42.6%
    Market price
    USD 173.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m395m790mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.3bnUSD 5.0bnUSD 4.8bnUSD 4.6bnUSD 4.4bn-4.2%
    EBITUSD 1.4bnUSD 1.4bnUSD 1.3bnUSD 1.3bnUSD 1.2bn-4.2%
    NOPATUSD 1.1bnUSD 1.1bnUSD 1.0bnUSD 991.9mUSD 949.8m-4.2%
    Add depreciation & amortisationUSD 296.1mUSD 283.5mUSD 271.5mUSD 260.0mUSD 248.9m-4.2%
    Less capital expenditureUSD -606.7mUSD -580.9mUSD -556.3mUSD -532.7mUSD -510.1m-4.2%
    Less increase in working capitalUSD -29.6mUSD -28.4mUSD -27.2mUSD -26.0mUSD -24.9m-4.2%
    Free cashflow to firmUSD 789.5mUSD 756.0mUSD 723.9mUSD 693.2mUSD 663.8m-4.2%
    Discount factor0.94870.85400.76870.69190.6228-
    Present valueUSD 749.0mUSD 645.6mUSD 556.5mUSD 479.6mUSD 413.4m-13.8%
    Present Value Of The ForecastUSD 2.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.111Reported 1.165, pulled toward 1.0 (Blume)
    Cost of equity11.11%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 36.0bn99.9% of capital
    Total debtUSD 40.0m0.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.10%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 44.28

    69% of EV

    Forecast FCFF, final year
    USD 663.8m
    Capex at depreciation, working capital in reinvestment
    USD 949.8m
    Less reinvestment at g/ROIC (8.6% of NOPAT)
    USD -81.6m
    Capitalised
    USD 868.3m
    ROIC (reported)
    29.1%
    Terminal value, undiscounted
    USD 10.4bn
    Terminal value, discounted
    USD 6.4bn
    Enterprise value
    USD 9.3bn
    Less net debt
    USD -80.1m
    Equity value
    USD 9.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 99.24

    86% of EV

    Terminal value, undiscounted
    USD 29.0bn
    Terminal value, discounted
    USD 18.1bn
    Enterprise value
    USD 20.9bn
    Less net debt
    USD -80.1m
    Equity value
    USD 21.0bn

    Spread between methods: 77%.

    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%
    9.10%52.8154.9757.4560.3363.72
    10.10%46.6948.2450.0051.9954.27
    11.10%41.8643.0144.2845.7147.32
    12.10%37.9538.8239.7740.8241.99
    13.10%34.7235.3936.1136.9137.78

    Outlined: this model. Green text: above today's price of 173.00. 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-4.2%28.5%+32.8pp
    Discount rate11.1%4.7%-6.4pp
    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.