DCF Studio

    RJF · NYQ · Financial Services

    Raymond James Financial, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 208.68

    Market price

    USD 164.75

    Implied upside

    +26.7%

    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.

    Value Per Share

    Perpetuity growth
    USD 208.68+26.7%
    Exit multiple
    USD 206.30+25.2%
    Market price
    USD 164.75

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 15.0bnUSD 16.3bnUSD 17.7bnUSD 19.2bnUSD 20.8bn+8.5%
    EBITUSD 3.0bnUSD 3.2bnUSD 3.5bnUSD 3.8bnUSD 4.1bn+8.5%
    NOPATUSD 2.3bnUSD 2.5bnUSD 2.8bnUSD 3.0bnUSD 3.2bn+8.5%
    Add depreciation & amortisationUSD 210.2mUSD 227.9mUSD 247.2mUSD 268.1mUSD 290.8m+8.5%
    Less capital expenditureUSD -199.9mUSD -216.8mUSD -235.2mUSD -255.0mUSD -276.6m+8.5%
    Less increase in working capitalUSD 4.0mUSD 4.3mUSD 4.7mUSD 5.1mUSD 5.5m-8.5%
    Free cashflow to firmUSD 2.4bnUSD 2.6bnUSD 2.8bnUSD 3.0bnUSD 3.3bn+8.5%
    Discount factor0.95500.87100.79440.72450.6608-
    Present valueUSD 2.3bnUSD 2.2bnUSD 2.2bnUSD 2.2bnUSD 2.2bn-1.1%
    Present Value Of The ForecastUSD 11.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.944Reported 0.917, pulled toward 1.0 (Blume)
    Cost of equity10.19%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 50.5% 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 31.6bn88.2% of capital
    Total debtUSD 4.2bn11.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.64%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 208.68

    69% of EV

    Forecast FCFF, final year
    USD 3.3bn
    Capex at depreciation, working capital in reinvestment
    USD 3.2bn
    Less reinvestment at g/ROIC (18.9% of NOPAT)
    USD -612.8m
    Capitalised
    USD 2.6bn
    ROIC (reported)
    13.2%
    Terminal value, undiscounted
    USD 37.7bn
    Terminal value, discounted
    USD 24.9bn
    Enterprise value
    USD 35.9bn
    Less net debt
    USD -7.2bn
    Equity value
    USD 43.1bn

    Exit at 8.4x EBITDA

    Value per shareUSD 206.30

    69% of EV

    Terminal value, undiscounted
    USD 37.0bn
    Terminal value, discounted
    USD 24.4bn
    Enterprise value
    USD 35.5bn
    Less net debt
    USD -7.2bn
    Equity value
    USD 42.6bn

    Spread between methods: 1%.

    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%
    7.64%255.53263.34272.58283.72297.45
    8.64%225.37230.06235.46241.73249.14
    9.64%202.60205.47208.68212.32216.48
    10.64%184.80186.54188.44190.55192.89
    11.64%170.50171.52172.60173.77175.04

    Outlined: this model. Green text: above today's price of 164.75. 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 year8.5%1.4%-7.0pp
    EBIT margin19.8%14.8%-5.0pp
    Discount rate9.6%12.2%+2.6pp
    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.