DCF Studio

    TSCO · NMS · Consumer Cyclical

    Tractor Supply Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 32.33

    Market price

    USD 32.21

    Implied upside

    +0.4%

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

    AdjustedCapital expenditure runs at 5.4% of revenue against depreciation of 2.8%. 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 32.33+0.4%
    Exit multiple
    USD 31.04-3.6%
    Market price
    USD 32.21

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m398m795mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 16.0bnUSD 16.5bnUSD 17.0bnUSD 17.5bnUSD 18.0bn+3.0%
    EBITUSD 1.6bnUSD 1.6bnUSD 1.7bnUSD 1.7bnUSD 1.8bn+3.0%
    NOPATUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.4bn+3.0%
    Add depreciation & amortisationUSD 451.8mUSD 465.4mUSD 479.4mUSD 493.8mUSD 508.6m+3.0%
    Less capital expenditureUSD -865.7mUSD -891.7mUSD -918.5mUSD -946.1mUSD -974.5m+3.0%
    Less increase in working capitalUSD -129.4mUSD -133.3mUSD -137.3mUSD -141.4mUSD -145.6m+3.0%
    Free cashflow to firmUSD 706.6mUSD 727.8mUSD 749.7mUSD 772.2mUSD 795.4m+3.0%
    Discount factor0.96520.89920.83770.78040.7271-
    Present valueUSD 682.0mUSD 654.4mUSD 628.0mUSD 602.6mUSD 578.3m-4.0%
    Present Value Of The ForecastUSD 3.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.644Reported 0.469, pulled toward 1.0 (Blume)
    Cost of equity8.54%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 16.8bn73.8% of capital
    Total debtUSD 5.9bn26.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.34%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 32.33

    86% of EV

    Forecast FCFF, final year
    USD 795.4m
    Capex at depreciation, working capital in reinvestment
    USD 1.4bn
    Less reinvestment at g/ROIC (8.6% of NOPAT)
    USD -120.5m
    Capitalised
    USD 1.3bn
    ROIC (reported)
    29.2%
    Terminal value, undiscounted
    USD 27.2bn
    Terminal value, discounted
    USD 19.8bn
    Enterprise value
    USD 23.0bn
    Less net debt
    USD 5.7bn
    Equity value
    USD 17.2bn

    Exit at 11.5x EBITDA

    Value per shareUSD 31.04

    86% of EV

    Terminal value, undiscounted
    USD 26.3bn
    Terminal value, discounted
    USD 19.1bn
    Enterprise value
    USD 22.3bn
    Less net debt
    USD 5.7bn
    Equity value
    USD 16.5bn

    Spread between methods: 4%.

    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%
    5.34%47.8454.8964.4278.0098.94
    6.34%35.1339.1344.1750.7159.54
    7.34%26.8029.3132.3336.0440.70
    8.34%20.9322.6024.5626.8829.67
    9.34%16.5817.7519.0920.6422.44

    Outlined: this model. Green text: above today's price of 32.21. 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 year3.0%2.9%-0.1pp
    EBIT margin9.9%9.9%-0.0pp
    Discount rate7.3%7.4%+0.0pp
    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.