DCF Studio

    PCG · NYQ · Utilities

    PG&E Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -10.41

    Market price

    USD 13.20

    Implied upside

    -178.8%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 43.4% of revenue against depreciation of 17.2%. 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 -10.41-178.8%
    Exit multiple
    USD -2.15-116.3%
    Market price
    USD 13.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -4934335847-24671679230FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 26.1bnUSD 27.4bnUSD 28.7bnUSD 30.0bnUSD 31.5bn+4.8%
    EBITUSD 3.8bnUSD 4.0bnUSD 4.2bnUSD 4.4bnUSD 4.6bn+4.8%
    NOPATUSD 3.0bnUSD 3.2bnUSD 3.3bnUSD 3.5bnUSD 3.7bn+4.8%
    Add depreciation & amortisationUSD 4.5bnUSD 4.7bnUSD 4.9bnUSD 5.2bnUSD 5.4bn+4.8%
    Less capital expenditureUSD -11.3bnUSD -11.9bnUSD -12.5bnUSD -13.0bnUSD -13.7bn+4.8%
    Less increase in working capitalUSD -281.5mUSD -295.0mUSD -309.0mUSD -323.8mUSD -339.2m+4.8%
    Free cashflow to firmUSD -4.1bnUSD -4.3bnUSD -4.5bnUSD -4.7bnUSD -4.9bn-4.8%
    Discount factor0.97500.92690.88110.83760.7963-
    Present valueUSD -4.0bnUSD -4.0bnUSD -4.0bnUSD -3.9bnUSD -3.9bn+0.4%
    Present Value Of The ForecastUSD -19.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.494Reported 0.245, pulled toward 1.0 (Blume)
    Cost of equity7.72%Risk-free + beta x equity risk premium
    Cost of debt5.06%Interest expense / average total debt
    Market capitalisationUSD 29.1bn32.2% of capital
    Total debtUSD 61.3bn67.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC5.19%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 -10.41

    153% of EV

    Forecast FCFF, final year
    USD -4.9bn
    Capex at depreciation, working capital in reinvestment
    USD 3.7bn
    Less reinvestment at g/ROIC (48.1% of NOPAT)
    USD -1.8bn
    Capitalised
    USD 1.9bn
    ROIC (WACC floor)
    5.2%
    Terminal value, undiscounted
    USD 72.2bn
    Terminal value, discounted
    USD 57.5bn
    Enterprise value
    USD 37.7bn
    Less net debt
    USD 60.6bn
    Equity value
    USD -22.9bn

    Exit at 9.5x EBITDA

    Value per shareUSD -2.15

    135% of EV

    Terminal value, undiscounted
    USD 95.0bn
    Terminal value, discounted
    USD 75.7bn
    Enterprise value
    USD 55.9bn
    Less net debt
    USD 60.6bn
    Equity value
    USD -4.7bn

    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%
    3.19%11.5114.0920.1156.15—
    4.19%-3.30-3.14-2.97-2.81-2.64
    5.19%-10.66-10.53-10.41-10.28-10.15
    6.19%-15.53-15.43-15.33-15.22-15.12
    7.19%-18.96-18.88-18.79-18.71-18.62

    Outlined: this model. Green text: above today's price of 13.20. 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 year4.8%23.3%+18.6pp
    EBIT margin14.7%25.3%+10.6pp
    Discount rate5.2%3.3%-1.9pp
    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.