DCF Studio

    ORLY · NMS · Consumer Cyclical

    O'Reilly Automotive, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 61.49

    Market price

    USD 84.71

    Implied upside

    -27.4%

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

    AdjustedCapital expenditure runs at 5.7% of revenue against depreciation of 2.7%. 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 61.49-27.4%
    Exit multiple
    USD 95.00+12.1%
    Market price
    USD 84.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 19.1bnUSD 20.5bnUSD 21.9bnUSD 23.5bnUSD 25.2bn+7.3%
    EBITUSD 3.8bnUSD 4.1bnUSD 4.4bnUSD 4.7bnUSD 5.0bn+7.3%
    NOPATUSD 3.0bnUSD 3.2bnUSD 3.4bnUSD 3.7bnUSD 4.0bn+7.3%
    Add depreciation & amortisationUSD 510.7mUSD 547.8mUSD 587.5mUSD 630.2mUSD 676.0m+7.3%
    Less capital expenditureUSD -1.1bnUSD -1.2bnUSD -1.3bnUSD -1.4bnUSD -1.4bn+7.3%
    Less increase in working capitalUSD 180.1mUSD 193.2mUSD 207.2mUSD 222.2mUSD 238.4m-7.3%
    Free cashflow to firmUSD 2.6bnUSD 2.8bnUSD 3.0bnUSD 3.2bnUSD 3.4bn+7.3%
    Discount factor0.96140.88870.82140.75930.7018-
    Present valueUSD 2.5bnUSD 2.5bnUSD 2.5bnUSD 2.4bnUSD 2.4bn-0.9%
    Present Value Of The ForecastUSD 12.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.675Reported 0.515, pulled toward 1.0 (Blume)
    Cost of equity8.71%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 68.5bn89.0% of capital
    Total debtUSD 8.5bn11.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.19%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 61.49

    80% of EV

    Forecast FCFF, final year
    USD 3.4bn
    Capex at depreciation, working capital in reinvestment
    USD 4.0bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -167.3m
    Capitalised
    USD 3.8bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 69.3bn
    Terminal value, discounted
    USD 48.7bn
    Enterprise value
    USD 60.9bn
    Less net debt
    USD 8.3bn
    Equity value
    USD 52.6bn

    Exit at 19.3x EBITDA

    Value per shareUSD 95.00

    86% of EV

    Terminal value, undiscounted
    USD 110.2bn
    Terminal value, discounted
    USD 77.4bn
    Enterprise value
    USD 89.6bn
    Less net debt
    USD 8.3bn
    Equity value
    USD 81.3bn

    Spread between methods: 43%.

    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%
    6.19%80.9189.63100.71115.26135.21
    7.19%64.6970.2176.9085.1895.71
    8.19%53.3457.0961.4966.7373.08
    9.19%44.9647.6350.7054.2558.43
    10.19%38.5240.5042.7345.2648.17

    Outlined: this model. Green text: above today's price of 84.71. 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 year7.3%13.8%+6.5pp
    EBIT margin19.9%26.2%+6.4pp
    Discount rate8.2%6.8%-1.4pp
    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.