DCF Studio

    RTX · NYQ · Industrials

    RTX Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 73.59

    Market price

    USD 194.00

    Implied upside

    -62.1%

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

    Current EV/EBITDA of 21.5x 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 73.59-62.1%
    Exit multiple
    USD 208.96+7.7%
    Market price
    USD 194.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 97.2bnUSD 106.7bnUSD 117.0bnUSD 128.4bnUSD 140.9bn+9.7%
    EBITUSD 7.8bnUSD 8.5bnUSD 9.4bnUSD 10.3bnUSD 11.3bn+9.7%
    NOPATUSD 6.5bnUSD 7.2bnUSD 7.9bnUSD 8.6bnUSD 9.5bn+9.7%
    Add depreciation & amortisationUSD 5.5bnUSD 6.0bnUSD 6.6bnUSD 7.2bnUSD 8.0bn+9.7%
    Less capital expenditureUSD -4.0bnUSD -4.3bnUSD -4.8bnUSD -5.2bnUSD -5.7bn+9.7%
    Less increase in working capitalUSD -790.9mUSD -867.8mUSD -952.2mUSD -1.0bnUSD -1.1bn+9.7%
    Free cashflow to firmUSD 7.3bnUSD 8.0bnUSD 8.8bnUSD 9.6bnUSD 10.5bn+9.7%
    Discount factor0.96500.89860.83680.77920.7256-
    Present valueUSD 7.0bnUSD 7.2bnUSD 7.3bnUSD 7.5bnUSD 7.6bn+2.2%
    Present Value Of The ForecastUSD 36.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.522Reported 0.287, pulled toward 1.0 (Blume)
    Cost of equity7.87%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 261.5bn86.9% of capital
    Total debtUSD 39.5bn13.1% of capital, book value as a proxy
    Tax rate16.0%Effective, capped at statutory
    WACC7.39%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 73.59

    72% of EV

    Forecast FCFF, final year
    USD 10.5bn
    Capex at depreciation, working capital in reinvestment
    USD 9.5bn
    Less reinvestment at g/ROIC (33.8% of NOPAT)
    USD -3.2bn
    Capitalised
    USD 6.3bn
    ROIC (WACC floor)
    7.4%
    Terminal value, undiscounted
    USD 131.2bn
    Terminal value, discounted
    USD 95.2bn
    Enterprise value
    USD 131.9bn
    Less net debt
    USD 32.1bn
    Equity value
    USD 99.8bn

    Exit at 20.0x EBITDA

    Value per shareUSD 208.96

    88% of EV

    Terminal value, undiscounted
    USD 384.3bn
    Terminal value, discounted
    USD 278.9bn
    Enterprise value
    USD 315.5bn
    Less net debt
    USD 32.1bn
    Equity value
    USD 283.4bn

    Spread between methods: 96%.

    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%
    5.39%108.45108.96109.47109.99110.50
    6.39%87.8988.3188.7289.1389.55
    7.39%72.9073.2473.5973.9374.27
    8.39%61.4861.7762.0662.3562.64
    9.39%52.5052.7553.0053.2453.49

    Outlined: this model. Green text: above today's price of 194.00. 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 year9.7%32.1%+22.4pp
    EBIT margin8.0%18.2%+10.2pp
    Discount rate7.4%4.1%-3.3pp
    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.