DCF Studio

    PNC · NYQ · Financial Services

    The PNC Financial Services Group, Inc.

    Also onConsensus Drift

    Implied value per share

    USD 198.84

    Market price

    USD 233.17

    Implied upside

    -14.7%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedReported capital expenditure averages just 0.00% 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 1.75% 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.

    Value Per Share

    Perpetuity growth
    USD 198.84-14.7%
    Exit multiple
    USD 248.91+6.7%
    Market price
    USD 233.17

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn4bn8bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 23.8bnUSD 24.5bnUSD 25.2bnUSD 26.0bnUSD 26.8bn+3.0%
    EBITUSD 8.2bnUSD 8.5bnUSD 8.7bnUSD 9.0bnUSD 9.3bn+3.0%
    NOPATUSD 6.8bnUSD 7.0bnUSD 7.2bnUSD 7.4bnUSD 7.6bn+3.0%
    Add depreciation & amortisationUSD 415.3mUSD 427.8mUSD 440.6mUSD 453.9mUSD 467.5m+3.0%
    Less capital expenditureUSD -415.3mUSD -427.8mUSD -440.6mUSD -453.9mUSD -467.5m+3.0%
    Less increase in working capitalUSD 582.0mUSD 599.5mUSD 617.6mUSD 636.2mUSD 655.3m-3.0%
    Free cashflow to firmUSD 7.3bnUSD 7.6bnUSD 7.8bnUSD 8.0bnUSD 8.3bn+3.0%
    Discount factor0.96030.88550.81660.75300.6944-
    Present valueUSD 7.1bnUSD 6.7bnUSD 6.4bnUSD 6.0bnUSD 5.7bn-5.0%
    Present Value Of The ForecastUSD 31.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.926Reported 0.889, pulled toward 1.0 (Blume)
    Cost of equity10.09%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 18.3% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 93.0bn62.0% of capital
    Total debtUSD 57.1bn38.0% of capital, book value as a proxy
    Tax rate17.7%Effective, capped at statutory
    WACC8.44%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 198.84

    67% of EV

    Forecast FCFF, final year
    USD 8.3bn
    Capex at depreciation, working capital in reinvestment
    USD 7.6bn
    Less reinvestment at g/ROIC (29.6% of NOPAT)
    USD -2.3bn
    Capitalised
    USD 5.4bn
    ROIC (WACC floor)
    8.4%
    Terminal value, undiscounted
    USD 92.5bn
    Terminal value, discounted
    USD 64.2bn
    Enterprise value
    USD 96.1bn
    Less net debt
    USD 17.4bn
    Equity value
    USD 78.7bn

    Exit at 12.5x EBITDA

    Value per shareUSD 248.91

    72% of EV

    Terminal value, undiscounted
    USD 121.0bn
    Terminal value, discounted
    USD 84.0bn
    Enterprise value
    USD 116.0bn
    Less net debt
    USD 17.4bn
    Equity value
    USD 98.6bn

    Spread between methods: 22%.

    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%
    6.44%269.19270.32271.45272.57273.70
    7.44%228.40229.33230.27231.21232.14
    8.44%197.26198.05198.84199.63200.42
    9.44%172.69173.37174.05174.73175.41
    10.44%152.83153.41154.00154.59155.18

    Outlined: this model. Green text: above today's price of 233.17. 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 year3.0%5.7%+2.7pp
    EBIT margin34.6%39.6%+5.0pp
    Discount rate8.4%7.4%-1.1pp
    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.