DCF Studio

    SOLV · NYQ · Healthcare

    Solventum Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 65.15

    Market price

    USD 88.84

    Implied upside

    -26.7%

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

    Value Per Share

    Perpetuity growth
    USD 65.15-26.7%
    Exit multiple
    USD 138.84+56.3%
    Market price
    USD 88.84

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 8.4bnUSD 8.5bnUSD 8.5bnUSD 8.6bnUSD 8.7bn+0.8%
    EBITUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bn+0.8%
    NOPATUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.1bn+0.8%
    Add depreciation & amortisationUSD 557.0mUSD 561.4mUSD 565.9mUSD 570.3mUSD 574.9m+0.8%
    Less capital expenditureUSD -331.1mUSD -333.7mUSD -336.3mUSD -339.0mUSD -341.7m+0.8%
    Less increase in working capitalUSD 66.0mUSD 66.6mUSD 67.1mUSD 67.6mUSD 68.2m-0.8%
    Free cashflow to firmUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.4bn+0.8%
    Discount factor0.96190.89010.82360.76200.7051-
    Present valueUSD 1.3bnUSD 1.2bnUSD 1.1bnUSD 1.0bnUSD 957.1m-6.7%
    Present Value Of The ForecastUSD 5.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.790Reported 0.687, pulled toward 1.0 (Blume)
    Cost of equity9.34%Risk-free + beta x equity risk premium
    Cost of debt5.32%Interest expense / average total debt
    Market capitalisationUSD 15.1bn75.0% of capital
    Total debtUSD 5.0bn25.0% of capital, book value as a proxy
    Tax rate19.9%Effective, capped at statutory
    WACC8.07%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 65.15

    65% of EV

    Forecast FCFF, final year
    USD 1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (26.6% of NOPAT)
    USD -281.0m
    Capitalised
    USD 775.0m
    ROIC (reported)
    9.4%
    Terminal value, undiscounted
    USD 14.3bn
    Terminal value, discounted
    USD 10.0bn
    Enterprise value
    USD 15.6bn
    Less net debt
    USD 4.2bn
    Equity value
    USD 11.4bn

    Exit at 17.2x EBITDA

    Value per shareUSD 138.84

    81% of EV

    Terminal value, undiscounted
    USD 32.6bn
    Terminal value, discounted
    USD 23.0bn
    Enterprise value
    USD 28.5bn
    Less net debt
    USD 4.2bn
    Equity value
    USD 24.3bn

    Spread between methods: 72%.

    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%
    6.07%95.40100.30106.49114.62125.80
    7.07%76.3078.6081.3684.7489.00
    8.07%62.9363.9765.1466.5168.13
    9.07%53.0453.4053.7854.1854.62
    10.07%45.9046.1046.2946.4946.68

    Outlined: this model. Green text: above today's price of 88.84. 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 year0.8%4.7%+3.9pp
    EBIT margin15.2%19.6%+4.4pp
    Discount rate8.1%6.7%-1.4pp
    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.