DCF Studio

    SGE.L · LSE · Technology

    The Sage Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 962.32

    Market price

    GBp 1008.50

    Implied upside

    -4.6%

    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 962.32-4.6%
    Exit multiple
    GBp 1188.86+17.9%
    Market price
    GBp 1008.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m328m656mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayGBP
    LineFY26FY27FY28FY29FY30CAGR
    RevenueGBP 2.7bnGBP 3.0bnGBP 3.2bnGBP 3.5bnGBP 3.8bn+8.9%
    EBITGBP 492.5mGBP 536.2mGBP 583.8mGBP 635.7mGBP 692.1m+8.9%
    NOPATGBP 374.4mGBP 407.7mGBP 443.9mGBP 483.3mGBP 526.2m+8.9%
    Add depreciation & amortisationGBP 127.5mGBP 138.8mGBP 151.1mGBP 164.5mGBP 179.1m+8.9%
    Less capital expenditureGBP -52.1mGBP -56.7mGBP -61.7mGBP -67.2mGBP -73.2m+8.9%
    Less increase in working capitalGBP 16.9mGBP 18.5mGBP 20.1mGBP 21.9mGBP 23.8m-8.9%
    Free cashflow to firmGBP 466.8mGBP 508.2mGBP 553.3mGBP 602.5mGBP 656.0m+8.9%
    Discount factor0.96710.90460.84610.79140.7403-
    Present valueGBP 451.4mGBP 459.7mGBP 468.2mGBP 476.8mGBP 485.6m+1.8%
    Present Value Of The ForecastGBP 2.3bn

    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
    Beta0.549Reported 0.327, pulled toward 1.0 (Blume)
    Cost of equity7.52%Risk-free + beta x equity risk premium
    Cost of debt4.50%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationGBP 9.1bn85.1% of capital
    Total debtGBP 1.6bn14.9% of capital, book value as a proxy
    Tax rate24.0%Effective, capped at statutory
    WACC6.91%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 9.62

    78% of EV

    Forecast FCFF, final year
    GBP 656.0m
    Capex at depreciation, working capital in reinvestment
    GBP 608.8m
    Less reinvestment at g/ROIC (19.8% of NOPAT)
    GBP -120.3m
    Capitalised
    GBP 488.5m
    ROIC (reported)
    12.7%
    Terminal value, undiscounted
    GBP 11.4bn
    Terminal value, discounted
    GBP 8.4bn
    Enterprise value
    GBP 10.7bn
    Less net debt
    GBP 1.2bn
    Equity value
    GBP 9.6bn

    Exit at 16.5x EBITDA

    Value per shareGBP 11.89

    82% of EV

    Terminal value, undiscounted
    GBP 14.4bn
    Terminal value, discounted
    GBP 10.7bn
    Enterprise value
    GBP 13.0bn
    Less net debt
    GBP 1.2bn
    Equity value
    GBP 11.8bn

    Spread between methods: 21%.

    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%
    4.91%14.2415.8518.1321.5927.49
    5.91%10.8211.6112.6314.0015.92
    6.91%8.669.109.6210.2811.12
    7.91%7.187.437.728.078.49
    8.91%6.096.246.416.606.83

    Outlined: this model. Green text: above today's price of 10.09. 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 year8.9%9.9%+1.0pp
    EBIT margin18.0%18.9%+0.9pp
    Discount rate6.9%6.7%-0.2pp
    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.