DCF Studio

    TRGP · NYQ · Energy

    Targa Resources Corp.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 10.92

    Market price

    USD 292.19

    Implied upside

    -96.3%

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

    Wrong toolThis model values the shares at 3.7% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 14.7% of revenue against depreciation of 7.8%. 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.

    Value Per Share

    Perpetuity growth
    USD 10.92-96.3%
    Exit multiple
    USD 82.40-71.8%
    Market price
    USD 292.19

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m436m872mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 15.9bnUSD 14.8bnUSD 13.9bnUSD 12.9bnUSD 12.1bn-6.6%
    EBITUSD 2.4bnUSD 2.2bnUSD 2.1bnUSD 2.0bnUSD 1.8bn-6.6%
    NOPATUSD 1.9bnUSD 1.8bnUSD 1.7bnUSD 1.6bnUSD 1.5bn-6.6%
    Add depreciation & amortisationUSD 1.2bnUSD 1.2bnUSD 1.1bnUSD 1.0bnUSD 938.8m-6.6%
    Less capital expenditureUSD -2.3bnUSD -2.2bnUSD -2.0bnUSD -1.9bnUSD -1.8bn-6.6%
    Less increase in working capitalUSD 32.3mUSD 30.2mUSD 28.2mUSD 26.3mUSD 24.6m+6.6%
    Free cashflow to firmUSD 872.5mUSD 814.5mUSD 760.4mUSD 709.9mUSD 662.7m-6.6%
    Discount factor0.96070.88670.81830.75530.6971-
    Present valueUSD 838.2mUSD 722.2mUSD 622.3mUSD 536.1mUSD 461.9m-13.8%
    Present Value Of The ForecastUSD 3.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.814Reported 0.722, pulled toward 1.0 (Blume)
    Cost of equity9.47%Risk-free + beta x equity risk premium
    Cost of debt5.37%Interest expense / average total debt
    Market capitalisationUSD 62.7bn78.1% of capital
    Total debtUSD 17.5bn21.9% of capital, book value as a proxy
    Tax rate19.3%Effective, capped at statutory
    WACC8.35%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 10.92

    84% of EV

    Forecast FCFF, final year
    USD 662.7m
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (18.8% of NOPAT)
    USD -313.6m
    Capitalised
    USD 1.4bn
    ROIC (reported)
    13.3%
    Terminal value, undiscounted
    USD 23.7bn
    Terminal value, discounted
    USD 16.5bn
    Enterprise value
    USD 19.7bn
    Less net debt
    USD 17.4bn
    Equity value
    USD 2.3bn

    Exit at 16.5x EBITDA

    Value per shareUSD 82.40

    91% of EV

    Terminal value, undiscounted
    USD 45.7bn
    Terminal value, discounted
    USD 31.9bn
    Enterprise value
    USD 35.0bn
    Less net debt
    USD 17.4bn
    Equity value
    USD 17.7bn

    Spread between methods: 153%.

    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%
    6.35%43.8151.7761.7474.6391.95
    7.35%21.0925.6231.0537.6745.95
    8.35%5.087.7810.9214.6019.00
    9.35%-6.79-5.14-3.27-1.151.31
    10.35%-15.92-14.91-13.80-12.56-11.17

    Outlined: this model. Green text: above today's price of 292.19. 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 year-6.6%25.8%+32.4pp
    EBIT margin15.2%57.3%+42.1pp
    Discount rate8.3%4.0%-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.