DCF Studio

    STLD · NMS · Basic Materials

    Steel Dynamics, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 78.75

    Market price

    USD 235.26

    Implied upside

    -66.5%

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

    AdjustedCapital expenditure runs at 7.2% of revenue against depreciation of 2.5%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 78.75-66.5%
    Exit multiple
    USD 182.80-22.3%
    Market price
    USD 235.26

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.0bnUSD 15.9bnUSD 14.8bnUSD 13.9bnUSD 13.0bn-6.5%
    EBITUSD 2.7bnUSD 2.5bnUSD 2.4bnUSD 2.2bnUSD 2.1bn-6.5%
    NOPATUSD 2.1bnUSD 2.0bnUSD 1.9bnUSD 1.8bnUSD 1.6bn-6.5%
    Add depreciation & amortisationUSD 417.0mUSD 389.8mUSD 364.3mUSD 340.5mUSD 318.3m-6.5%
    Less capital expenditureUSD -1.2bnUSD -1.1bnUSD -1.1bnUSD -997.7mUSD -932.5m-6.5%
    Less increase in working capitalUSD 177.2mUSD 165.6mUSD 154.8mUSD 144.7mUSD 135.2m+6.5%
    Free cashflow to firmUSD 1.5bnUSD 1.4bnUSD 1.3bnUSD 1.2bnUSD 1.2bn-6.5%
    Discount factor0.94720.84980.76250.68410.6138-
    Present valueUSD 1.4bnUSD 1.2bnUSD 1.0bnUSD 847.7mUSD 710.8m-16.1%
    Present Value Of The ForecastUSD 5.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.345Reported 1.515, pulled toward 1.0 (Blume)
    Cost of equity12.40%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 33.7bn88.9% of capital
    Total debtUSD 4.2bn11.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC11.46%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 78.75

    66% of EV

    Forecast FCFF, final year
    USD 1.2bn
    Capex at depreciation, working capital in reinvestment
    USD 1.6bn
    Less reinvestment at g/ROIC (13.8% of NOPAT)
    USD -225.2m
    Capitalised
    USD 1.4bn
    ROIC (reported)
    18.2%
    Terminal value, undiscounted
    USD 16.2bn
    Terminal value, discounted
    USD 9.9bn
    Enterprise value
    USD 15.1bn
    Less net debt
    USD 3.4bn
    Equity value
    USD 11.7bn

    Exit at 17.3x EBITDA

    Value per shareUSD 182.80

    83% of EV

    Terminal value, undiscounted
    USD 41.3bn
    Terminal value, discounted
    USD 25.4bn
    Enterprise value
    USD 30.6bn
    Less net debt
    USD 3.4bn
    Equity value
    USD 27.1bn

    Spread between methods: 80%.

    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%
    9.46%99.30102.75106.67111.16116.37
    10.46%85.9288.3090.9593.9397.31
    11.46%75.2576.9278.7580.7883.03
    12.46%66.5467.7269.0170.4171.94
    13.46%59.3060.1461.0462.0263.07

    Outlined: this model. Green text: above today's price of 235.26. 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 year-6.5%18.1%+24.6pp
    EBIT margin16.0%37.5%+21.5pp
    Discount rate11.5%5.9%-5.5pp
    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.