DCF Studio

    SLF.TO · TOR · Financial Services

    Sun Life Financial Inc.

    Also onConsensus Drift

    Implied value per share

    CAD 2276.75

    Market price

    CAD 113.79

    Implied upside

    +1900.8%

    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.
    Wrong toolThis model values the shares at 20.0x the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedConsensus rests on as few as 1 analyst estimate(s).
    AdjustedReported capital expenditure averages just 0.32% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 3.85% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 2276.75+1900.8%
    Exit multiple
    CAD 2105.63+1750.5%
    Market price
    CAD 113.79

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn53bn106bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 57.7bnCAD 86.5bnCAD 129.8bnCAD 194.6bnCAD 292.0bn+50.0%
    EBITCAD 20.4bnCAD 30.6bnCAD 45.9bnCAD 68.9bnCAD 103.4bn+50.0%
    NOPATCAD 16.7bnCAD 25.1bnCAD 37.6bnCAD 56.4bnCAD 84.6bn+50.0%
    Add depreciation & amortisationCAD 2.2bnCAD 3.3bnCAD 5.0bnCAD 7.5bnCAD 11.2bn+50.0%
    Less capital expenditureCAD -2.2bnCAD -3.3bnCAD -5.0bnCAD -7.5bnCAD -11.2bn+50.0%
    Less increase in working capitalCAD 4.2bnCAD 6.2bnCAD 9.3bnCAD 14.0bnCAD 21.0bn-50.0%
    Free cashflow to firmCAD 20.9bnCAD 31.3bnCAD 47.0bnCAD 70.4bnCAD 105.7bn+50.0%
    Discount factor0.96750.90550.84750.79330.7425-
    Present valueCAD 20.2bnCAD 28.3bnCAD 39.8bnCAD 55.9bnCAD 78.4bn+40.4%
    Present Value Of The ForecastCAD 222.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.867Reported 0.802, pulled toward 1.0 (Blume)
    Cost of equity8.07%Risk-free + beta x equity risk premium
    Cost of debt3.30%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationCAD 63.3bn77.1% of capital
    Total debtCAD 18.8bn22.9% of capital, book value as a proxy
    Tax rate18.1%Effective, capped at statutory
    WACC6.84%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 shareCAD 2276.75

    83% of EV

    Forecast FCFF, final year
    CAD 105.7bn
    Capex at depreciation, working capital in reinvestment
    CAD 84.6bn
    Less reinvestment at g/ROIC (28.8% of NOPAT)
    CAD -24.4bn
    Capitalised
    CAD 60.3bn
    ROIC (reported)
    8.7%
    Terminal value, undiscounted
    CAD 1423.4bn
    Terminal value, discounted
    CAD 1056.8bn
    Enterprise value
    CAD 1279.5bn
    Less net debt
    CAD -9.1bn
    Equity value
    CAD 1288.6bn

    Exit at 11.3x EBITDA

    Value per shareCAD 2105.63

    81% of EV

    Terminal value, undiscounted
    CAD 1293.0bn
    Terminal value, discounted
    CAD 960.0bn
    Enterprise value
    CAD 1182.6bn
    Less net debt
    CAD -9.1bn
    Equity value
    CAD 1191.8bn

    Spread between methods: 8%.

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.84%3472.063774.614203.424861.366004.71
    5.84%2662.002789.122952.313170.583479.24
    6.84%2155.192210.352276.742358.752463.39
    7.84%1808.191829.431853.501881.271914.04
    8.84%1559.931565.711571.491577.261583.04

    Outlined: this model. Green text: above today's price of 113.79. 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 year50.0%-23.3%-73.3pp
    EBIT margin35.4%0.3%-35.1pp
    Discount rate6.8%89.9%+83.1pp
    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.