DCF Studio

    TKO · NYQ · Communication Services

    TKO Group Holdings, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 316.02

    Market price

    USD 189.26

    Implied upside

    +67.0%

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

    AdjustedReported capital expenditure averages 2.28% of revenue against depreciation of 6.93%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 6.93% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Current EV/EBITDA of 29.0x 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
    USD 316.02+67.0%
    Exit multiple
    USD 752.40+297.5%
    Market price
    USD 189.26

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn6bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 7.1bnUSD 10.7bnUSD 16.0bnUSD 24.0bnUSD 36.0bn+50.0%
    EBITUSD 1.4bnUSD 2.1bnUSD 3.1bnUSD 4.7bnUSD 7.0bn+50.0%
    NOPATUSD 1.2bnUSD 1.8bnUSD 2.7bnUSD 4.1bnUSD 6.2bn+50.0%
    Add depreciation & amortisationUSD 598.8mUSD 898.2mUSD 1.3bnUSD 2.0bnUSD 3.0bn+50.0%
    Less capital expenditureUSD -492.4mUSD -738.7mUSD -1.1bnUSD -1.7bnUSD -2.5bn+50.0%
    Less increase in working capitalUSD -227.7mUSD -341.5mUSD -512.3mUSD -768.4mUSD -1.2bn+50.0%
    Free cashflow to firmUSD 1.1bnUSD 1.7bnUSD 2.5bnUSD 3.7bnUSD 5.6bn+50.0%
    Discount factor0.95890.88170.81070.74550.6855-
    Present valueUSD 1.1bnUSD 1.5bnUSD 2.0bnUSD 2.8bnUSD 3.8bn+37.9%
    Present Value Of The ForecastUSD 11.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.761Reported 0.643, pulled toward 1.0 (Blume)
    Cost of equity9.18%Risk-free + beta x equity risk premium
    Cost of debt5.67%Interest expense / average total debt
    Market capitalisationUSD 35.8bn89.8% of capital
    Total debtUSD 4.1bn10.2% of capital, book value as a proxy
    Tax rate12.2%Effective, capped at statutory
    WACC8.75%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 316.02

    83% of EV

    Forecast FCFF, final year
    USD 5.6bn
    Capex at depreciation, working capital in reinvestment
    USD 6.7bn
    Less reinvestment at g/ROIC (28.6% of NOPAT)
    USD -1.9bn
    Capitalised
    USD 4.8bn
    ROIC (WACC floor)
    8.8%
    Terminal value, undiscounted
    USD 78.0bn
    Terminal value, discounted
    USD 53.4bn
    Enterprise value
    USD 64.5bn
    Less net debt
    USD 3.2bn
    Equity value
    USD 61.3bn

    Exit at 20.0x EBITDA

    Value per shareUSD 752.40

    93% of EV

    Terminal value, undiscounted
    USD 201.5bn
    Terminal value, discounted
    USD 138.1bn
    Enterprise value
    USD 149.2bn
    Less net debt
    USD 3.2bn
    Equity value
    USD 146.0bn

    Spread between methods: 82%.

    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%
    6.75%438.41445.16453.09462.67474.67
    7.75%363.26364.84366.42368.00369.58
    8.75%313.34314.68316.02317.37318.71
    9.75%273.89275.05276.21277.37278.52
    10.75%241.99243.00244.01245.01246.02

    Outlined: this model. Green text: above today's price of 189.26. 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 year50.0%35.3%-14.7pp
    EBIT margin19.6%11.8%-7.8pp
    Discount rate8.8%13.1%+4.3pp
    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.