DCF Studio

    RL · NYQ · Consumer Cyclical

    Ralph Lauren Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 213.35

    Market price

    USD 335.10

    Implied upside

    -36.3%

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

    Value Per Share

    Perpetuity growth
    USD 213.35-36.3%
    Exit multiple
    USD 348.29+3.9%
    Market price
    USD 335.10

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 8.8bnUSD 9.5bnUSD 10.2bnUSD 11.0bnUSD 11.9bn+8.0%
    EBITUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+8.0%
    NOPATUSD 938.9mUSD 1.0bnUSD 1.1bnUSD 1.2bnUSD 1.3bn+8.0%
    Add depreciation & amortisationUSD 281.5mUSD 304.0mUSD 328.2mUSD 354.5mUSD 382.8m+8.0%
    Less capital expenditureUSD -316.6mUSD -341.9mUSD -369.2mUSD -398.7mUSD -430.5m+8.0%
    Less increase in working capitalUSD 292.4mUSD 315.8mUSD 341.0mUSD 368.2mUSD 397.6m-8.0%
    Free cashflow to firmUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+8.0%
    Discount factor0.95010.85780.77440.69910.6311-
    Present valueUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.0bn-2.5%
    Present Value Of The ForecastUSD 5.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.237Reported 1.353, pulled toward 1.0 (Blume)
    Cost of equity11.80%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 20.0bn86.9% of capital
    Total debtUSD 3.0bn13.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.77%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 213.35

    62% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 1.3bn
    Less reinvestment at g/ROIC (12.7% of NOPAT)
    USD -164.8m
    Capitalised
    USD 1.1bn
    ROIC (reported)
    19.6%
    Terminal value, undiscounted
    USD 14.0bn
    Terminal value, discounted
    USD 8.8bn
    Enterprise value
    USD 14.2bn
    Less net debt
    USD 944.4m
    Equity value
    USD 13.3bn

    Exit at 13.7x EBITDA

    Value per shareUSD 348.29

    76% of EV

    Terminal value, undiscounted
    USD 27.3bn
    Terminal value, discounted
    USD 17.2bn
    Enterprise value
    USD 22.6bn
    Less net debt
    USD 944.4m
    Equity value
    USD 21.7bn

    Spread between methods: 48%.

    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%
    8.77%259.03268.09278.53290.72305.16
    9.77%228.31234.51241.52249.51258.73
    10.77%204.14208.50213.35218.78224.91
    11.77%184.61187.74191.17194.95199.15
    12.77%168.49170.76173.22175.90178.84

    Outlined: this model. Green text: above today's price of 335.10. 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 year8.0%17.1%+9.1pp
    EBIT margin13.6%21.5%+7.9pp
    Discount rate10.8%7.7%-3.1pp
    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.