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    TPL · NYQ · Energy

    Texas Pacific Land Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 113.80

    Market price

    USD 352.67

    Implied upside

    -67.7%

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

    AdjustedConsensus rests on as few as 1 analyst estimate(s).
    AdjustedCapital expenditure runs at 33.5% of revenue against depreciation of 4.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 37.0x 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 113.80-67.7%
    Exit multiple
    USD 192.33-45.5%
    Market price
    USD 352.67

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m172m344mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 847.2mUSD 899.3mUSD 954.6mUSD 1.0bnUSD 1.1bn+6.1%
    EBITUSD 660.4mUSD 701.0mUSD 744.0mUSD 789.8mUSD 838.3m+6.1%
    NOPATUSD 521.7mUSD 553.8mUSD 587.8mUSD 623.9mUSD 662.3m+6.1%
    Add depreciation & amortisationUSD 34.0mUSD 36.1mUSD 38.3mUSD 40.6mUSD 43.1m+6.1%
    Less capital expenditureUSD -284.0mUSD -301.4mUSD -320.0mUSD -339.6mUSD -360.5m+6.1%
    Less increase in working capitalUSD -618.6kUSD -656.6kUSD -696.9kUSD -739.7kUSD -785.2k+6.1%
    Free cashflow to firmUSD 271.1mUSD 287.7mUSD 305.4mUSD 324.2mUSD 344.1m+6.1%
    Discount factor0.95740.87770.80450.73750.6761-
    Present valueUSD 259.5mUSD 252.5mUSD 245.7mUSD 239.1mUSD 232.6m-2.7%
    Present Value Of The ForecastUSD 1.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.744Reported 0.618, pulled toward 1.0 (Blume)
    Cost of equity9.09%Risk-free + beta x equity risk premium
    Cost of debt8.30%Interest expense / average total debt
    Market capitalisationUSD 24.3bn99.9% of capital
    Total debtUSD 16.2m0.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.09%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 113.80

    84% of EV

    Forecast FCFF, final year
    USD 344.1m
    Capex at depreciation, working capital in reinvestment
    USD 662.3m
    Less reinvestment at g/ROIC (6.7% of NOPAT)
    USD -44.5m
    Capitalised
    USD 617.8m
    ROIC (reported)
    37.2%
    Terminal value, undiscounted
    USD 9.6bn
    Terminal value, discounted
    USD 6.5bn
    Enterprise value
    USD 7.7bn
    Less net debt
    USD -128.6m
    Equity value
    USD 7.9bn

    Exit at 20.0x EBITDA

    Value per shareUSD 192.33

    91% of EV

    Terminal value, undiscounted
    USD 17.6bn
    Terminal value, discounted
    USD 11.9bn
    Enterprise value
    USD 13.1bn
    Less net debt
    USD -128.6m
    Equity value
    USD 13.3bn

    Spread between methods: 51%.

    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%
    7.09%143.38154.22167.40183.78204.70
    8.09%120.04127.26135.75145.90158.23
    9.09%102.93107.99113.80120.56128.50
    10.09%89.8993.5797.72102.45107.88
    11.09%79.6382.3885.4588.8892.76

    Outlined: this model. Green text: above today's price of 352.67. 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 year6.1%35.0%+28.8pp
    Discount rate9.1%4.7%-4.3pp
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    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.