DCF Studio

    UAL · NMS · Industrials

    United Airlines Holdings, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 178.27

    Market price

    USD 108.71

    Implied upside

    +64.0%

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

    AdjustedCapital expenditure runs at 11.0% of revenue against depreciation of 5.1%. 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.

    Value Per Share

    Perpetuity growth
    USD 178.27+64.0%
    Exit multiple
    USD 179.62+65.2%
    Market price
    USD 108.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 64.7bnUSD 70.9bnUSD 77.6bnUSD 85.0bnUSD 93.1bn+9.5%
    EBITUSD 5.3bnUSD 5.8bnUSD 6.3bnUSD 6.9bnUSD 7.6bn+9.5%
    NOPATUSD 4.2bnUSD 4.6bnUSD 5.0bnUSD 5.5bnUSD 6.0bn+9.5%
    Add depreciation & amortisationUSD 3.3bnUSD 3.6bnUSD 4.0bnUSD 4.4bnUSD 4.8bn+9.5%
    Less capital expenditureUSD -7.1bnUSD -7.8bnUSD -8.5bnUSD -9.3bnUSD -10.2bn+9.5%
    Less increase in working capitalUSD 3.2bnUSD 3.5bnUSD 3.8bnUSD 4.2bnUSD 4.6bn-9.5%
    Free cashflow to firmUSD 3.6bnUSD 3.9bnUSD 4.3bnUSD 4.7bnUSD 5.2bn+9.5%
    Discount factor0.96240.89140.82560.76470.7083-
    Present valueUSD 3.5bnUSD 3.5bnUSD 3.6bnUSD 3.6bnUSD 3.7bn+1.4%
    Present Value Of The ForecastUSD 17.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.182Reported 1.272, pulled toward 1.0 (Blume)
    Cost of equity11.50%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 35.3bn53.2% of capital
    Total debtUSD 31.0bn46.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.97%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 178.27

    77% of EV

    Forecast FCFF, final year
    USD 5.2bn
    Capex at depreciation, working capital in reinvestment
    USD 6.0bn
    Less reinvestment at g/ROIC (25.4% of NOPAT)
    USD -1.5bn
    Capitalised
    USD 4.5bn
    ROIC (reported)
    9.9%
    Terminal value, undiscounted
    USD 84.0bn
    Terminal value, discounted
    USD 59.5bn
    Enterprise value
    USD 77.4bn
    Less net debt
    USD 18.8bn
    Equity value
    USD 58.6bn

    Exit at 6.8x EBITDA

    Value per shareUSD 179.62

    77% of EV

    Terminal value, undiscounted
    USD 84.7bn
    Terminal value, discounted
    USD 60.0bn
    Enterprise value
    USD 77.8bn
    Less net debt
    USD 18.8bn
    Equity value
    USD 59.0bn

    Spread between methods: 1%.

    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%
    5.97%271.11288.44310.56339.90380.84
    6.97%210.93219.41229.63242.25258.32
    7.97%169.40173.52178.28183.86190.54
    8.97%139.00140.80142.78144.99147.48
    9.97%116.06116.66117.26117.86118.46

    Outlined: this model. Green text: above today's price of 108.71. 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 year9.5%4.2%-5.3pp
    EBIT margin8.2%5.8%-2.3pp
    Discount rate8.0%10.5%+2.5pp
    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.