DCF Studio

    Q · NYQ · Technology

    Qnity Electronics, Inc.

    Also onConsensus Drift

    Implied value per share

    USD 36.47

    Market price

    USD 120.05

    Implied upside

    -69.6%

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

    Current EV/EBITDA of 20.3x 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 36.47-69.6%
    Exit multiple
    USD 89.19-25.7%
    Market price
    USD 120.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m475m951mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 4.8bnUSD 4.8bnUSD 4.8bnUSD 4.8bnUSD 4.8bn-0.0%
    EBITUSD 937.6mUSD 937.5mUSD 937.5mUSD 937.4mUSD 937.4m-0.0%
    NOPATUSD 771.2mUSD 771.1mUSD 771.1mUSD 771.0mUSD 770.9m-0.0%
    Add depreciation & amortisationUSD 424.2mUSD 424.1mUSD 424.1mUSD 424.1mUSD 424.1m-0.0%
    Less capital expenditureUSD -244.6mUSD -244.6mUSD -244.6mUSD -244.5mUSD -244.5m-0.0%
    Less increase in working capitalUSD -19.9kUSD -19.9kUSD -19.9kUSD -19.9kUSD -19.9k-0.0%
    Free cashflow to firmUSD 950.7mUSD 950.6mUSD 950.6mUSD 950.5mUSD 950.4m-0.0%
    Discount factor0.95510.87140.79490.72520.6616-
    Present valueUSD 908.1mUSD 828.3mUSD 755.6mUSD 689.3mUSD 628.8m-8.8%
    Present Value Of The ForecastUSD 3.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.000As reported
    Cost of equity10.50%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 25.1bn86.2% of capital
    Total debtUSD 4.0bn13.8% of capital, book value as a proxy
    Tax rate17.8%Effective, capped at statutory
    WACC9.62%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 36.47

    65% of EV

    Forecast FCFF, final year
    USD 950.4m
    Capex at depreciation, working capital in reinvestment
    USD 986.0m
    Less reinvestment at g/ROIC (26.0% of NOPAT)
    USD -256.3m
    Capitalised
    USD 729.6m
    ROIC (WACC floor)
    9.6%
    Terminal value, undiscounted
    USD 10.5bn
    Terminal value, discounted
    USD 7.0bn
    Enterprise value
    USD 10.8bn
    Less net debt
    USD 3.1bn
    Equity value
    USD 7.7bn

    Exit at 20.0x EBITDA

    Value per shareUSD 89.19

    83% of EV

    Terminal value, undiscounted
    USD 27.2bn
    Terminal value, discounted
    USD 18.0bn
    Enterprise value
    USD 21.8bn
    Less net debt
    USD 3.1bn
    Equity value
    USD 18.7bn

    Spread between methods: 84%.

    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%
    7.62%49.1449.3749.5949.8150.03
    8.62%41.8942.0842.2742.4542.64
    9.62%36.1536.3136.4736.6336.79
    10.62%31.4931.6331.7731.9132.05
    11.62%27.6327.7627.8828.0028.13

    Outlined: this model. Green text: above today's price of 120.05. 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-0.0%24.2%+24.2pp
    EBIT margin19.7%60.3%+40.6pp
    Discount rate9.6%4.6%-5.0pp
    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.