DCF Studio

    T · NYQ · Communication Services

    AT&T Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 38.80

    Market price

    USD 25.40

    Implied upside

    +52.7%

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

    Value Per Share

    Perpetuity growth
    USD 38.80+52.7%
    Exit multiple
    USD 27.79+9.4%
    Market price
    USD 25.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn11bn22bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 127.3bnUSD 129.0bnUSD 130.8bnUSD 132.5bnUSD 134.3bn+1.3%
    EBITUSD 25.1bnUSD 25.4bnUSD 25.7bnUSD 26.1bnUSD 26.4bn+1.3%
    NOPATUSD 19.8bnUSD 20.1bnUSD 20.3bnUSD 20.6bnUSD 20.9bn+1.3%
    Add depreciation & amortisationUSD 20.3bnUSD 20.6bnUSD 20.8bnUSD 21.1bnUSD 21.4bn+1.3%
    Less capital expenditureUSD -20.4bnUSD -20.6bnUSD -20.9bnUSD -21.2bnUSD -21.5bn+1.3%
    Less increase in working capitalUSD 730.8mUSD 740.5mUSD 750.4mUSD 760.5mUSD 770.6m-1.3%
    Free cashflow to firmUSD 20.4bnUSD 20.7bnUSD 21.0bnUSD 21.3bnUSD 21.6bn+1.3%
    Discount factor0.96990.91240.85830.80740.7595-
    Present valueUSD 19.8bnUSD 18.9bnUSD 18.0bnUSD 17.2bnUSD 16.4bn-4.7%
    Present Value Of The ForecastUSD 90.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.619Reported 0.431, pulled toward 1.0 (Blume)
    Cost of equity8.40%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 174.1bn52.9% of capital
    Total debtUSD 155.0bn47.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.30%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 38.80

    78% of EV

    Forecast FCFF, final year
    USD 21.6bn
    Capex at depreciation, working capital in reinvestment
    USD 23.0bn
    Less reinvestment at g/ROIC (31.1% of NOPAT)
    USD -7.2bn
    Capitalised
    USD 15.9bn
    ROIC (reported)
    8.1%
    Terminal value, undiscounted
    USD 428.0bn
    Terminal value, discounted
    USD 325.0bn
    Enterprise value
    USD 415.3bn
    Less net debt
    USD 136.8bn
    Equity value
    USD 278.5bn

    Exit at 6.8x EBITDA

    Value per shareUSD 27.79

    73% of EV

    Terminal value, undiscounted
    USD 323.9bn
    Terminal value, discounted
    USD 246.0bn
    Enterprise value
    USD 336.3bn
    Less net debt
    USD 136.8bn
    Equity value
    USD 199.5bn

    Spread between methods: 33%.

    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%
    4.30%72.3082.4598.12125.70187.39
    5.30%49.0252.8257.9165.1476.30
    6.30%35.4236.9338.8041.1944.37
    7.30%26.4927.0127.6128.3229.18
    8.30%20.3620.5020.6320.7720.90

    Outlined: this model. Green text: above today's price of 25.40. 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 year1.3%-3.7%-5.0pp
    EBIT margin19.7%14.7%-5.0pp
    Discount rate6.3%7.6%+1.3pp
    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.