DCF Studio

    TXT · NYQ · Industrials

    Textron Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 55.95

    Market price

    USD 79.69

    Implied upside

    -29.8%

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

    Value Per Share

    Perpetuity growth
    USD 55.95-29.8%
    Exit multiple
    USD 84.56+6.1%
    Market price
    USD 79.69

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m443m886mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 15.5bnUSD 16.2bnUSD 17.0bnUSD 17.8bnUSD 18.7bn+4.8%
    EBITUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.3bn+4.8%
    NOPATUSD 906.3mUSD 949.5mUSD 994.7mUSD 1.0bnUSD 1.1bn+4.8%
    Add depreciation & amortisationUSD 444.6mUSD 465.8mUSD 488.0mUSD 511.2mUSD 535.6m+4.8%
    Less capital expenditureUSD -423.8mUSD -444.0mUSD -465.2mUSD -487.3mUSD -510.6m+4.8%
    Less increase in working capitalUSD -191.7mUSD -200.8mUSD -210.4mUSD -220.4mUSD -230.9m+4.8%
    Free cashflow to firmUSD 735.4mUSD 770.4mUSD 807.2mUSD 845.6mUSD 886.0m+4.8%
    Discount factor0.95860.88090.80940.74380.6835-
    Present valueUSD 704.9mUSD 678.6mUSD 653.3mUSD 629.0mUSD 605.5m-3.7%
    Present Value Of The ForecastUSD 3.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.932Reported 0.898, pulled toward 1.0 (Blume)
    Cost of equity10.12%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 13.7bn77.9% of capital
    Total debtUSD 3.9bn22.1% of capital, book value as a proxy
    Tax rate15.2%Effective, capped at statutory
    WACC8.82%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 55.95

    73% of EV

    Forecast FCFF, final year
    USD 886.0m
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (28.3% of NOPAT)
    USD -309.3m
    Capitalised
    USD 782.6m
    ROIC (WACC floor)
    8.8%
    Terminal value, undiscounted
    USD 12.7bn
    Terminal value, discounted
    USD 8.7bn
    Enterprise value
    USD 11.9bn
    Less net debt
    USD 1.9bn
    Equity value
    USD 10.1bn

    Exit at 11.1x EBITDA

    Value per shareUSD 84.56

    81% of EV

    Terminal value, undiscounted
    USD 20.2bn
    Terminal value, discounted
    USD 13.8bn
    Enterprise value
    USD 17.1bn
    Less net debt
    USD 1.9bn
    Equity value
    USD 15.2bn

    Spread between methods: 41%.

    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%
    6.82%76.4377.1477.9378.8679.96
    7.82%64.2664.5464.8165.0965.36
    8.82%55.4955.7255.9556.1956.42
    9.82%48.5248.7248.9249.1249.33
    10.82%42.8643.0343.2143.3843.56

    Outlined: this model. Green text: above today's price of 79.69. 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 year4.8%15.4%+10.6pp
    EBIT margin6.9%9.2%+2.3pp
    Discount rate8.8%6.7%-2.1pp
    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.