DCF Studio

    STE · NYQ · Healthcare

    STERIS plc

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 130.58

    Market price

    USD 205.04

    Implied upside

    -36.3%

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

    Value Per Share

    Perpetuity growth
    USD 130.58-36.3%
    Exit multiple
    USD 272.05+32.7%
    Market price
    USD 205.04

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 6.5bnUSD 7.1bnUSD 7.8bnUSD 8.5bnUSD 9.3bn+9.4%
    EBITUSD 1.1bnUSD 1.3bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+9.4%
    NOPATUSD 903.5mUSD 988.2mUSD 1.1bnUSD 1.2bnUSD 1.3bn+9.4%
    Add depreciation & amortisationUSD 651.0mUSD 712.0mUSD 778.8mUSD 851.8mUSD 931.7m+9.4%
    Less capital expenditureUSD -454.3mUSD -496.9mUSD -543.5mUSD -594.4mUSD -650.2m+9.4%
    Less increase in working capitalUSD 31.7mUSD 34.6mUSD 37.9mUSD 41.4mUSD 45.3m-9.4%
    Free cashflow to firmUSD 1.1bnUSD 1.2bnUSD 1.4bnUSD 1.5bnUSD 1.6bn+9.4%
    Discount factor0.95520.87160.79530.72570.6622-
    Present valueUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bn-0.2%
    Present Value Of The ForecastUSD 5.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.942Reported 0.914, pulled toward 1.0 (Blume)
    Cost of equity10.18%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 20.0bn90.5% of capital
    Total debtUSD 2.1bn9.5% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.59%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 130.58

    63% of EV

    Forecast FCFF, final year
    USD 1.6bn
    Capex at depreciation, working capital in reinvestment
    USD 1.3bn
    Less reinvestment at g/ROIC (26.1% of NOPAT)
    USD -337.0m
    Capitalised
    USD 956.1m
    ROIC (WACC floor)
    9.6%
    Terminal value, undiscounted
    USD 13.8bn
    Terminal value, discounted
    USD 9.2bn
    Enterprise value
    USD 14.5bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 12.9bn

    Exit at 13.6x EBITDA

    Value per shareUSD 272.05

    81% of EV

    Terminal value, undiscounted
    USD 34.9bn
    Terminal value, discounted
    USD 23.1bn
    Enterprise value
    USD 28.5bn
    Less net debt
    USD 1.6bn
    Equity value
    USD 26.9bn

    Spread between methods: 70%.

    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%
    7.59%167.95169.25170.68172.31174.18
    8.59%145.94146.47147.00147.52148.05
    9.59%129.67130.13130.58131.03131.48
    10.59%116.46116.85117.24117.64118.03
    11.59%105.51105.85106.20106.54106.89

    Outlined: this model. Green text: above today's price of 205.04. 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 year9.4%20.0%+10.6pp
    EBIT margin17.6%27.2%+9.6pp
    Discount rate9.6%6.7%-2.9pp
    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.