DCF Studio

    TD.TO · TOR · Financial Services

    The Toronto-Dominion Bank

    Also onConsensus Drift

    Implied value per share

    CAD 51.03

    Market price

    CAD 171.48

    Implied upside

    -70.2%

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

    Current EV/EBITDA of 23.5x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    CAD 51.03-70.2%
    Exit multiple
    CAD 163.06-4.9%
    Market price
    CAD 171.48

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn8bn16bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 67.5bnCAD 74.5bnCAD 82.1bnCAD 90.5bnCAD 99.7bn+10.2%
    EBITCAD 21.5bnCAD 23.7bnCAD 26.2bnCAD 28.8bnCAD 31.8bn+10.2%
    NOPATCAD 16.8bnCAD 18.5bnCAD 20.4bnCAD 22.5bnCAD 24.8bn+10.2%
    Add depreciation & amortisationCAD 2.5bnCAD 2.7bnCAD 3.0bnCAD 3.3bnCAD 3.7bn+10.2%
    Less capital expenditureCAD -2.4bnCAD -2.6bnCAD -2.9bnCAD -3.2bnCAD -3.5bn+10.2%
    Less increase in working capitalCAD -6.3bnCAD -6.9bnCAD -7.6bnCAD -8.4bnCAD -9.2bn+10.2%
    Free cashflow to firmCAD 10.7bnCAD 11.7bnCAD 12.9bnCAD 14.3bnCAD 15.7bn+10.2%
    Discount factor0.97240.91940.86940.82200.7773-
    Present valueCAD 10.4bnCAD 10.8bnCAD 11.3bnCAD 11.7bnCAD 12.2bn+4.2%
    Present Value Of The ForecastCAD 56.4bn

    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
    Beta0.910Reported 0.866, pulled toward 1.0 (Blume)
    Cost of equity8.31%Risk-free + beta x equity risk premium
    Cost of debt5.30%Implied cost of debt of 12.1% 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 capitalisationCAD 281.0bn38.8% of capital
    Total debtCAD 442.4bn61.2% of capital, book value as a proxy
    Tax rate21.9%Effective, capped at statutory
    WACC5.76%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 51.03

    86% of EV

    Forecast FCFF, final year
    CAD 15.7bn
    Capex at depreciation, working capital in reinvestment
    CAD 25.8bn
    Less reinvestment at g/ROIC (43.4% of NOPAT)
    CAD -11.2bn
    Capitalised
    CAD 14.6bn
    ROIC (WACC floor)
    5.8%
    Terminal value, undiscounted
    CAD 459.7bn
    Terminal value, discounted
    CAD 357.3bn
    Enterprise value
    CAD 413.7bn
    Less net debt
    CAD 325.5bn
    Equity value
    CAD 88.2bn

    Exit at 20.0x EBITDA

    Value per shareCAD 163.06

    91% of EV

    Terminal value, undiscounted
    CAD 708.8bn
    Terminal value, discounted
    CAD 550.9bn
    Enterprise value
    CAD 607.3bn
    Less net debt
    CAD 325.5bn
    Equity value
    CAD 281.8bn

    Spread between methods: 105%.

    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%
    3.76%187.75189.44191.12192.80351.45
    4.76%103.67104.94106.22107.49108.77
    5.76%49.0150.0251.0352.0453.05
    6.76%10.7011.5312.3513.1714.00
    7.76%-17.59-16.90-16.21-15.52-14.83

    Outlined: this model. Green text: above today's price of 171.48. 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 year10.2%21.7%+11.5pp
    EBIT margin31.9%47.2%+15.3pp
    Discount rate5.8%4.0%-1.8pp
    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.