DCF Studio

    STT · NYQ · Financial Services

    State Street Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 500.73

    Market price

    USD 182.87

    Implied upside

    +173.8%

    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.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    USD 500.73+173.8%
    Exit multiple
    USD 509.23+178.5%
    Market price
    USD 182.87

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 14.6bnUSD 15.3bnUSD 16.1bnUSD 16.9bnUSD 17.7bn+4.8%
    EBITUSD 3.7bnUSD 3.8bnUSD 4.0bnUSD 4.2bnUSD 4.4bn+4.8%
    NOPATUSD 3.0bnUSD 3.1bnUSD 3.3bnUSD 3.4bnUSD 3.6bn+4.8%
    Add depreciation & amortisationUSD 935.7mUSD 980.8mUSD 1.0bnUSD 1.1bnUSD 1.1bn+4.8%
    Less capital expenditureUSD -1.0bnUSD -1.1bnUSD -1.1bnUSD -1.2bnUSD -1.2bn+4.8%
    Less increase in working capitalUSD 673.4mUSD 705.9mUSD 739.9mUSD 775.6mUSD 813.0m-4.8%
    Free cashflow to firmUSD 3.6bnUSD 3.7bnUSD 3.9bnUSD 4.1bnUSD 4.3bn+4.8%
    Discount factor0.95470.87020.79310.72290.6589-
    Present valueUSD 3.4bnUSD 3.3bnUSD 3.1bnUSD 3.0bnUSD 2.8bn-4.5%
    Present Value Of The ForecastUSD 15.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.280Reported 1.418, pulled toward 1.0 (Blume)
    Cost of equity12.04%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 28.0% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 50.2bn63.4% of capital
    Total debtUSD 29.0bn36.6% of capital, book value as a proxy
    Tax rate18.7%Effective, capped at statutory
    WACC9.72%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 500.73

    63% of EV

    Forecast FCFF, final year
    USD 4.3bn
    Capex at depreciation, working capital in reinvestment
    USD 3.8bn
    Less reinvestment at g/ROIC (25.7% of NOPAT)
    USD -990.1m
    Capitalised
    USD 2.9bn
    ROIC (WACC floor)
    9.7%
    Terminal value, undiscounted
    USD 40.6bn
    Terminal value, discounted
    USD 26.7bn
    Enterprise value
    USD 42.3bn
    Less net debt
    USD -102.4bn
    Equity value
    USD 144.7bn

    Exit at 8.0x EBITDA

    Value per shareUSD 509.23

    65% of EV

    Terminal value, undiscounted
    USD 44.3bn
    Terminal value, discounted
    USD 29.2bn
    Enterprise value
    USD 44.8bn
    Less net debt
    USD -102.4bn
    Equity value
    USD 147.2bn

    Spread between methods: 2%.

    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%
    7.72%536.00536.62537.23537.85538.47
    8.72%515.84516.37516.89517.42517.94
    9.72%499.83500.28500.73501.18501.63
    10.72%486.79487.18487.58487.97488.36
    11.72%475.97476.32476.66477.01477.35

    Outlined: this model. Green text: above today's price of 182.87. Shading: distance from this model's own value.

    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.