DCF Studio

    RSG · NYQ · Industrials

    Republic Services, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 123.39

    Market price

    USD 218.07

    Implied upside

    -43.4%

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

    Value Per Share

    Perpetuity growth
    USD 123.39-43.4%
    Exit multiple
    USD 243.69+11.7%
    Market price
    USD 218.07

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.8bnUSD 19.0bnUSD 20.4bnUSD 21.8bnUSD 23.4bn+7.1%
    EBITUSD 3.4bnUSD 3.7bnUSD 3.9bnUSD 4.2bnUSD 4.5bn+7.1%
    NOPATUSD 2.8bnUSD 3.0bnUSD 3.2bnUSD 3.4bnUSD 3.7bn+7.1%
    Add depreciation & amortisationUSD 2.0bnUSD 2.1bnUSD 2.2bnUSD 2.4bnUSD 2.6bn+7.1%
    Less capital expenditureUSD -2.0bnUSD -2.1bnUSD -2.3bnUSD -2.4bnUSD -2.6bn+7.1%
    Less increase in working capitalUSD -286.4mUSD -306.7mUSD -328.5mUSD -351.7mUSD -376.6m+7.1%
    Free cashflow to firmUSD 2.5bnUSD 2.7bnUSD 2.8bnUSD 3.0bnUSD 3.3bn+7.1%
    Discount factor0.96420.89630.83330.77470.7202-
    Present valueUSD 2.4bnUSD 2.4bnUSD 2.4bnUSD 2.4bnUSD 2.3bn-0.4%
    Present Value Of The ForecastUSD 11.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.598Reported 0.400, pulled toward 1.0 (Blume)
    Cost of equity8.29%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 66.8bn82.9% of capital
    Total debtUSD 13.8bn17.1% of capital, book value as a proxy
    Tax rate18.2%Effective, capped at statutory
    WACC7.57%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 123.39

    77% of EV

    Forecast FCFF, final year
    USD 3.3bn
    Capex at depreciation, working capital in reinvestment
    USD 3.7bn
    Less reinvestment at g/ROIC (24.4% of NOPAT)
    USD -895.7m
    Capitalised
    USD 2.8bn
    ROIC (reported)
    10.2%
    Terminal value, undiscounted
    USD 56.1bn
    Terminal value, discounted
    USD 40.4bn
    Enterprise value
    USD 52.3bn
    Less net debt
    USD 13.7bn
    Equity value
    USD 38.5bn

    Exit at 15.3x EBITDA

    Value per shareUSD 243.69

    87% of EV

    Terminal value, undiscounted
    USD 108.2bn
    Terminal value, discounted
    USD 78.0bn
    Enterprise value
    USD 89.8bn
    Less net debt
    USD 13.7bn
    Equity value
    USD 76.1bn

    Spread between methods: 66%.

    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%
    5.57%191.96207.70228.41257.01299.23
    6.57%145.79153.51163.02175.07190.91
    7.57%114.84118.77123.39128.94135.74
    8.57%92.6594.5996.8099.32102.27
    9.57%75.9676.8077.7078.6979.77

    Outlined: this model. Green text: above today's price of 218.07. 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 year7.1%18.9%+11.8pp
    EBIT margin19.2%29.7%+10.6pp
    Discount rate7.6%5.7%-1.9pp
    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.