DCF Studio

    SBRY.L · LSE · Consumer Defensive

    J Sainsbury plc

    Also onConsensus Drift

    Implied value per share

    GBp 345.19

    Market price

    GBp 334.90

    Implied upside

    +3.1%

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

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 345.19+3.1%
    Exit multiple
    GBp 349.87+4.5%
    Market price
    GBp 334.90

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m446m891mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 34.4bnGBP 35.2bnGBP 36.0bnGBP 36.8bnGBP 37.6bn+2.2%
    EBITGBP 858.4mGBP 877.6mGBP 897.2mGBP 917.2mGBP 937.7m+2.2%
    NOPATGBP 643.8mGBP 658.2mGBP 672.9mGBP 687.9mGBP 703.3m+2.2%
    Add depreciation & amortisationGBP 1.3bnGBP 1.3bnGBP 1.3bnGBP 1.4bnGBP 1.4bn+2.2%
    Less capital expenditureGBP -1.1bnGBP -1.1bnGBP -1.1bnGBP -1.1bnGBP -1.2bn+2.2%
    Less increase in working capitalGBP -36.0mGBP -36.9mGBP -37.7mGBP -38.5mGBP -39.4m+2.2%
    Free cashflow to firmGBP 816.1mGBP 834.3mGBP 852.9mGBP 871.9mGBP 891.4m+2.2%
    Discount factor0.96660.90310.84370.78830.7365-
    Present valueGBP 788.8mGBP 753.4mGBP 719.6mGBP 687.3mGBP 656.5m-4.5%
    Present Value Of The ForecastGBP 3.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.999Reported 0.999, pulled toward 1.0 (Blume)
    Cost of equity10.00%Risk-free + beta x equity risk premium
    Cost of debt5.01%Interest expense / average total debt
    Market capitalisationGBP 7.3bn52.5% of capital
    Total debtGBP 6.6bn47.5% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC7.03%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 shareGBP 3.45

    73% of EV

    Forecast FCFF, final year
    GBP 891.4m
    Capex at depreciation, working capital in reinvestment
    GBP 860.1m
    Less reinvestment at g/ROIC (30.6% of NOPAT)
    GBP -263.2m
    Capitalised
    GBP 596.9m
    ROIC (reported)
    8.2%
    Terminal value, undiscounted
    GBP 13.5bn
    Terminal value, discounted
    GBP 9.9bn
    Enterprise value
    GBP 13.5bn
    Less net debt
    GBP 5.5bn
    Equity value
    GBP 8.0bn

    Exit at 5.9x EBITDA

    Value per shareGBP 3.50

    74% of EV

    Terminal value, undiscounted
    GBP 13.6bn
    Terminal value, discounted
    GBP 10.0bn
    Enterprise value
    GBP 13.7bn
    Less net debt
    GBP 5.5bn
    Equity value
    GBP 8.1bn

    Spread between methods: 1%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.03%6.216.797.588.7710.70
    6.03%4.414.644.945.325.85
    7.03%3.263.353.453.583.74
    8.03%2.452.482.502.522.55
    9.03%1.921.941.951.971.98

    Outlined: this model. Green text: above today's price of 3.35. 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 year2.2%1.8%-0.5pp
    EBIT margin2.5%2.4%-0.1pp
    Discount rate7.0%7.1%+0.1pp
    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.