DCF Studio

    T.TO · TOR · Communication Services

    TELUS Corporation

    Also onConsensus Drift

    Implied value per share

    CAD 26.92

    Market price

    CAD 12.31

    Implied upside

    +118.7%

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

    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 26.92+118.7%
    Exit multiple
    CAD 18.62+51.3%
    Market price
    CAD 12.31

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 21.1bnCAD 21.8bnCAD 22.6bnCAD 23.4bnCAD 24.3bn+3.6%
    EBITCAD 2.8bnCAD 2.9bnCAD 3.0bnCAD 3.1bnCAD 3.2bn+3.6%
    NOPATCAD 2.1bnCAD 2.2bnCAD 2.2bnCAD 2.3bnCAD 2.4bn+3.6%
    Add depreciation & amortisationCAD 4.1bnCAD 4.3bnCAD 4.5bnCAD 4.6bnCAD 4.8bn+3.6%
    Less capital expenditureCAD -3.4bnCAD -3.6bnCAD -3.7bnCAD -3.8bnCAD -4.0bn+3.6%
    Less increase in working capitalCAD -236.8mCAD -245.3mCAD -254.2mCAD -263.3mCAD -272.8m+3.6%
    Free cashflow to firmCAD 2.6bnCAD 2.7bnCAD 2.8bnCAD 2.9bnCAD 3.0bn+3.6%
    Discount factor0.97450.92550.87900.83480.7928-
    Present valueCAD 2.5bnCAD 2.5bnCAD 2.4bnCAD 2.4bnCAD 2.4bn-1.6%
    Present Value Of The ForecastCAD 12.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.30%CAD assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.822Reported 0.734, pulled toward 1.0 (Blume)
    Cost of equity7.82%Risk-free + beta x equity risk premium
    Cost of debt4.97%Interest expense / average total debt
    Market capitalisationCAD 19.4bn38.1% of capital
    Total debtCAD 31.5bn61.9% of capital, book value as a proxy
    Tax rate24.8%Effective, capped at statutory
    WACC5.30%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 shareCAD 26.92

    83% of EV

    Forecast FCFF, final year
    CAD 3.0bn
    Capex at depreciation, working capital in reinvestment
    CAD 3.8bn
    Less reinvestment at g/ROIC (47.2% of NOPAT)
    CAD -1.8bn
    Capitalised
    CAD 2.0bn
    ROIC (WACC floor)
    5.3%
    Terminal value, undiscounted
    CAD 73.2bn
    Terminal value, discounted
    CAD 58.0bn
    Enterprise value
    CAD 70.2bn
    Less net debt
    CAD 28.8bn
    Equity value
    CAD 41.3bn

    Exit at 7.1x EBITDA

    Value per shareCAD 18.62

    79% of EV

    Terminal value, undiscounted
    CAD 57.1bn
    Terminal value, discounted
    CAD 45.3bn
    Enterprise value
    CAD 57.4bn
    Less net debt
    CAD 28.8bn
    Equity value
    CAD 28.6bn

    Spread between methods: 36%.

    Sensitivity

    Value per share (CAD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    3.30%67.6478.73103.46210.97—
    4.30%37.4837.7237.9538.1938.43
    5.30%26.5526.7426.9227.1127.29
    6.30%19.1119.2619.4119.5619.71
    7.30%13.7313.8513.9814.1014.22

    Outlined: this model. Green text: above today's price of 12.31. 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 year3.6%-5.7%-9.4pp
    EBIT margin13.2%6.9%-6.3pp
    Discount rate5.3%7.7%+2.4pp
    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.