DCF Studio

    TDG · NYQ · Industrials

    TransDigm Group Incorporated

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 1147.30

    Market price

    USD 1086.05

    Implied upside

    +5.6%

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

    Value Per Share

    Perpetuity growth
    USD 1147.30+5.6%
    Exit multiple
    USD 2079.08+91.4%
    Market price
    USD 1086.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn6bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.4bnUSD 12.2bnUSD 14.4bnUSD 16.9bnUSD 19.9bn+17.6%
    EBITUSD 4.6bnUSD 5.4bnUSD 6.4bnUSD 7.5bnUSD 8.8bn+17.6%
    NOPATUSD 3.6bnUSD 4.3bnUSD 5.0bnUSD 5.9bnUSD 7.0bn+17.6%
    Add depreciation & amortisationUSD 436.6mUSD 513.5mUSD 603.9mUSD 710.2mUSD 835.2m+17.6%
    Less capital expenditureUSD -230.9mUSD -271.6mUSD -319.4mUSD -375.7mUSD -441.8m+17.6%
    Less increase in working capitalUSD -579.7mUSD -681.7mUSD -801.8mUSD -942.9mUSD -1.1bn+17.6%
    Free cashflow to firmUSD 3.3bnUSD 3.8bnUSD 4.5bnUSD 5.3bnUSD 6.3bn+17.6%
    Discount factor0.96120.88800.82040.75790.7002-
    Present valueUSD 3.1bnUSD 3.4bnUSD 3.7bnUSD 4.0bnUSD 4.4bn+8.7%
    Present Value Of The ForecastUSD 18.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.928Reported 0.893, pulled toward 1.0 (Blume)
    Cost of equity10.10%Risk-free + beta x equity risk premium
    Cost of debt5.72%Interest expense / average total debt
    Market capitalisationUSD 60.0bn66.7% of capital
    Total debtUSD 30.0bn33.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.24%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 1147.30

    80% of EV

    Forecast FCFF, final year
    USD 6.3bn
    Capex at depreciation, working capital in reinvestment
    USD 7.3bn
    Less reinvestment at g/ROIC (17.7% of NOPAT)
    USD -1.3bn
    Capitalised
    USD 6.0bn
    ROIC (reported)
    14.1%
    Terminal value, undiscounted
    USD 107.6bn
    Terminal value, discounted
    USD 75.3bn
    Enterprise value
    USD 94.0bn
    Less net debt
    USD 27.2bn
    Equity value
    USD 66.8bn

    Exit at 19.2x EBITDA

    Value per shareUSD 2079.08

    87% of EV

    Terminal value, undiscounted
    USD 185.0bn
    Terminal value, discounted
    USD 129.5bn
    Enterprise value
    USD 148.2bn
    Less net debt
    USD 27.2bn
    Equity value
    USD 121.0bn

    Spread between methods: 58%.

    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%
    6.24%1702.671847.072029.152266.332588.75
    7.24%1312.591395.431495.061617.411771.57
    8.24%1038.721088.911147.301216.241299.05
    9.24%836.01867.38902.96943.75991.13
    10.24%680.03699.89721.94746.64774.58

    Outlined: this model. Green text: above today's price of 1086.05. 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 year17.6%16.6%-1.0pp
    EBIT margin44.4%42.7%-1.7pp
    Discount rate8.2%8.5%+0.2pp
    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.