DCF Studio

    TRP.TO · TOR · Energy

    TC Energy Corporation

    Also onConsensus Drift

    Implied value per share

    CAD 26.37

    Market price

    CAD 86.01

    Implied upside

    -69.3%

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

    AdjustedCapital expenditure runs at 49.2% of revenue against depreciation of 20.1%. 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.
    NoteRisk-free rate is an assumption: CAD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    CAD 26.37-69.3%
    Exit multiple
    CAD 101.78+18.3%
    Market price
    CAD 86.01

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CAD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCAD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCAD 16.4bnCAD 17.6bnCAD 18.9bnCAD 20.3bnCAD 21.8bn+7.4%
    EBITCAD 7.0bnCAD 7.6bnCAD 8.1bnCAD 8.7bnCAD 9.4bn+7.4%
    NOPATCAD 5.4bnCAD 5.8bnCAD 6.2bnCAD 6.7bnCAD 7.2bn+7.4%
    Add depreciation & amortisationCAD 3.3bnCAD 3.5bnCAD 3.8bnCAD 4.1bnCAD 4.4bn+7.4%
    Less capital expenditureCAD -8.1bnCAD -8.7bnCAD -9.3bnCAD -10.0bnCAD -10.7bn+7.4%
    Less increase in working capitalCAD 242.9mCAD 260.8mCAD 280.1mCAD 300.7mCAD 322.9m-7.4%
    Free cashflow to firmCAD 874.8mCAD 939.3mCAD 1.0bnCAD 1.1bnCAD 1.2bn+7.4%
    Discount factor0.96850.90850.85230.79950.7500-
    Present valueCAD 847.3mCAD 853.4mCAD 859.6mCAD 865.8mCAD 872.1m+0.7%
    Present Value Of The ForecastCAD 4.3bn

    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
    Beta0.966Reported 0.950, pulled toward 1.0 (Blume)
    Cost of equity8.62%Risk-free + beta x equity risk premium
    Cost of debt4.73%Interest expense / average total debt
    Market capitalisationCAD 89.6bn59.6% of capital
    Total debtCAD 60.6bn40.4% of capital, book value as a proxy
    Tax rate23.2%Effective, capped at statutory
    WACC6.60%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 26.37

    95% of EV

    Forecast FCFF, final year
    CAD 1.2bn
    Capex at depreciation, working capital in reinvestment
    CAD 7.2bn
    Less reinvestment at g/ROIC (37.9% of NOPAT)
    CAD -2.7bn
    Capitalised
    CAD 4.5bn
    ROIC (WACC floor)
    6.6%
    Terminal value, undiscounted
    CAD 111.5bn
    Terminal value, discounted
    CAD 83.6bn
    Enterprise value
    CAD 87.9bn
    Less net debt
    CAD 60.5bn
    Equity value
    CAD 27.4bn

    Exit at 15.7x EBITDA

    Value per shareCAD 101.78

    97% of EV

    Terminal value, undiscounted
    CAD 216.0bn
    Terminal value, discounted
    CAD 162.0bn
    Enterprise value
    CAD 166.3bn
    Less net debt
    CAD 60.5bn
    Equity value
    CAD 105.8bn

    Spread between methods: 118%.

    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%
    4.60%76.7581.0887.2096.80114.62
    5.60%43.9644.4444.9245.4045.89
    6.60%25.5925.9826.3726.7627.16
    7.60%12.1812.5112.8313.1613.49
    8.60%2.002.272.552.833.10

    Outlined: this model. Green text: above today's price of 86.01. 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 year7.4%19.3%+12.0pp
    EBIT margin43.0%67.2%+24.2pp
    Discount rate6.6%4.6%-2.0pp
    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.