DCF Studio

    SCHW · NYQ · Financial Services

    The Charles Schwab Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 70.44

    Market price

    USD 105.25

    Implied upside

    -33.1%

    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 70.44-33.1%
    Exit multiple
    USD 97.62-7.3%
    Market price
    USD 105.25

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 25.1bnUSD 26.3bnUSD 27.6bnUSD 28.9bnUSD 30.3bn+4.8%
    EBITUSD 10.4bnUSD 10.9bnUSD 11.5bnUSD 12.0bnUSD 12.6bn+4.8%
    NOPATUSD 8.2bnUSD 8.6bnUSD 9.0bnUSD 9.5bnUSD 9.9bn+4.8%
    Add depreciation & amortisationUSD 1.6bnUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 2.0bn+4.8%
    Less capital expenditureUSD -868.1mUSD -910.0mUSD -954.0mUSD -1.0bnUSD -1.0bn+4.8%
    Less increase in working capitalUSD -1.2bnUSD -1.2bnUSD -1.3bnUSD -1.3bnUSD -1.4bn+4.8%
    Free cashflow to firmUSD 7.8bnUSD 8.2bnUSD 8.6bnUSD 9.0bnUSD 9.5bn+4.8%
    Discount factor0.95640.87480.80020.73190.6695-
    Present valueUSD 7.5bnUSD 7.2bnUSD 6.9bnUSD 6.6bnUSD 6.3bn-4.1%
    Present Value Of The ForecastUSD 34.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.835Reported 0.753, pulled toward 1.0 (Blume)
    Cost of equity9.59%Risk-free + beta x equity risk premium
    Cost of debt9.87%Interest expense / average total debt
    Market capitalisationUSD 182.0bn85.5% of capital
    Total debtUSD 31.0bn14.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.33%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 70.44

    69% of EV

    Forecast FCFF, final year
    USD 9.5bn
    Capex at depreciation, working capital in reinvestment
    USD 10.6bn
    Less reinvestment at g/ROIC (26.8% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 7.7bn
    ROIC (reported)
    9.3%
    Terminal value, undiscounted
    USD 116.2bn
    Terminal value, discounted
    USD 77.8bn
    Enterprise value
    USD 112.4bn
    Less net debt
    USD -15.1bn
    Equity value
    USD 127.4bn

    Exit at 13.0x EBITDA

    Value per shareUSD 97.62

    79% of EV

    Terminal value, undiscounted
    USD 189.6bn
    Terminal value, discounted
    USD 127.0bn
    Enterprise value
    USD 161.5bn
    Less net debt
    USD -15.1bn
    Equity value
    USD 176.6bn

    Spread between methods: 32%.

    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%
    7.33%90.4692.2794.4196.98100.18
    8.33%78.7479.5280.3881.3782.51
    9.33%70.0270.2370.4470.6670.87
    10.33%63.9364.1164.2964.4764.66
    11.33%58.9359.0959.2559.4159.57

    Outlined: this model. Green text: above today's price of 105.25. 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 year4.8%18.4%+13.5pp
    EBIT margin41.6%65.5%+23.9pp
    Discount rate9.3%6.8%-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.