DCF Studio

    PPG · NYQ · Basic Materials

    PPG Industries, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 70.56

    Market price

    USD 104.52

    Implied upside

    -32.5%

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

    Value Per Share

    Perpetuity growth
    USD 70.56-32.5%
    Exit multiple
    USD 88.76-15.1%
    Market price
    USD 104.52

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 16.0bnUSD 16.1bnUSD 16.1bnUSD 16.2bnUSD 16.3bn+0.6%
    EBITUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.1bn+0.6%
    NOPATUSD 1.7bnUSD 1.7bnUSD 1.7bnUSD 1.7bnUSD 1.7bn+0.6%
    Add depreciation & amortisationUSD 511.2mUSD 514.1mUSD 516.9mUSD 519.8mUSD 522.7m+0.6%
    Less capital expenditureUSD -628.2mUSD -631.6mUSD -635.1mUSD -638.7mUSD -642.2m+0.6%
    Less increase in working capitalUSD 40.3mUSD 40.6mUSD 40.8mUSD 41.0mUSD 41.2m-0.6%
    Free cashflow to firmUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bn+0.6%
    Discount factor0.95780.87860.80600.73940.6783-
    Present valueUSD 1.5bnUSD 1.4bnUSD 1.3bnUSD 1.2bnUSD 1.1bn-7.8%
    Present Value Of The ForecastUSD 6.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.042Reported 1.063, pulled toward 1.0 (Blume)
    Cost of equity10.73%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 23.2bn74.6% of capital
    Total debtUSD 7.9bn25.4% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.01%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 70.56

    70% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 1.8bn
    Less reinvestment at g/ROIC (20.9% of NOPAT)
    USD -377.4m
    Capitalised
    USD 1.4bn
    ROIC (reported)
    11.9%
    Terminal value, undiscounted
    USD 22.5bn
    Terminal value, discounted
    USD 15.2bn
    Enterprise value
    USD 21.7bn
    Less net debt
    USD 5.7bn
    Equity value
    USD 16.0bn

    Exit at 10.7x EBITDA

    Value per shareUSD 88.76

    75% of EV

    Terminal value, undiscounted
    USD 28.5bn
    Terminal value, discounted
    USD 19.4bn
    Enterprise value
    USD 25.8bn
    Less net debt
    USD 5.7bn
    Equity value
    USD 20.2bn

    Spread between methods: 23%.

    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%
    7.01%99.08104.02109.99117.40126.84
    8.01%80.6783.4686.7290.5795.23
    9.01%67.1668.7670.5672.6475.04
    10.01%56.8257.7158.6959.7961.01
    11.01%48.6449.1049.5950.1250.69

    Outlined: this model. Green text: above today's price of 104.52. 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 year0.6%6.2%+5.6pp
    EBIT margin13.1%17.9%+4.8pp
    Discount rate9.0%7.2%-1.8pp
    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.