DCF Studio

    RF · NYQ · Financial Services

    Regions Financial Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 35.10

    Market price

    USD 28.50

    Implied upside

    +23.1%

    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.

    Value Per Share

    Perpetuity growth
    USD 35.10+23.1%
    Exit multiple
    USD 31.52+10.6%
    Market price
    USD 28.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.7bnUSD 7.8bnUSD 7.9bnUSD 8.0bnUSD 8.2bn+1.7%
    EBITUSD 2.8bnUSD 2.8bnUSD 2.9bnUSD 2.9bnUSD 2.9bn+1.7%
    NOPATUSD 2.2bnUSD 2.2bnUSD 2.3bnUSD 2.3bnUSD 2.3bn+1.7%
    Add depreciation & amortisationUSD 214.0mUSD 217.6mUSD 221.2mUSD 224.8mUSD 228.5m+1.7%
    Less capital expenditureUSD -163.6mUSD -166.3mUSD -169.0mUSD -171.8mUSD -174.6m+1.7%
    Less increase in working capitalUSD -124.3mUSD -126.4mUSD -128.5mUSD -130.6mUSD -132.8m+1.7%
    Free cashflow to firmUSD 2.1bnUSD 2.1bnUSD 2.2bnUSD 2.2bnUSD 2.3bn+1.7%
    Discount factor0.95490.87060.79380.72380.6599-
    Present valueUSD 2.0bnUSD 1.9bnUSD 1.7bnUSD 1.6bnUSD 1.5bn-7.3%
    Present Value Of The ForecastUSD 8.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.002Reported 1.003, pulled toward 1.0 (Blume)
    Cost of equity10.51%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 36.6% 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 24.3bn83.3% of capital
    Total debtUSD 4.9bn16.7% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC9.68%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 35.10

    66% of EV

    Forecast FCFF, final year
    USD 2.3bn
    Capex at depreciation, working capital in reinvestment
    USD 2.3bn
    Less reinvestment at g/ROIC (23.8% of NOPAT)
    USD -554.4m
    Capitalised
    USD 1.8bn
    ROIC (reported)
    10.5%
    Terminal value, undiscounted
    USD 25.4bn
    Terminal value, discounted
    USD 16.7bn
    Enterprise value
    USD 25.4bn
    Less net debt
    USD -6.0bn
    Equity value
    USD 31.4bn

    Exit at 6.5x EBITDA

    Value per shareUSD 31.52

    61% of EV

    Terminal value, undiscounted
    USD 20.5bn
    Terminal value, discounted
    USD 13.5bn
    Enterprise value
    USD 22.2bn
    Less net debt
    USD -6.0bn
    Equity value
    USD 28.2bn

    Spread between methods: 11%.

    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%
    7.68%43.1143.9744.9846.1847.65
    8.68%38.3138.7539.2439.8140.47
    9.68%34.6834.8835.1035.3335.59
    10.68%31.8831.9632.0332.1132.19
    11.68%29.7729.8429.9129.9830.04

    Outlined: this model. Green text: above today's price of 28.50. 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 year1.7%-7.5%-9.1pp
    EBIT margin36.1%27.8%-8.3pp
    Discount rate9.7%12.4%+2.8pp
    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.