DCF Studio

    UMG.AS · AMS · Communication Services

    Universal Music Group N.V.

    Also onConsensus Drift

    Implied value per share

    EUR 12.66

    Market price

    EUR 14.75

    Implied upside

    -14.2%

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

    NoteRisk-free rate is an assumption: USD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    EUR 12.66-14.2%
    Exit multiple
    EUR 15.85+7.5%
    Market price
    EUR 14.75

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (EUR). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayEUR
    LineFY26FY27FY28FY29FY30CAGR
    RevenueEUR 13.3bnEUR 14.2bnEUR 15.1bnEUR 16.1bnEUR 17.2bn+6.5%
    EBITEUR 2.1bnEUR 2.2bnEUR 2.3bnEUR 2.5bnEUR 2.7bn+6.5%
    NOPATEUR 1.5bnEUR 1.6bnEUR 1.8bnEUR 1.9bnEUR 2.0bn+6.5%
    Add depreciation & amortisationEUR 470.0mEUR 500.7mEUR 533.5mEUR 568.5mEUR 605.7m+6.5%
    Less capital expenditureEUR -505.5mEUR -538.6mEUR -573.9mEUR -611.5mEUR -651.5m+6.5%
    Less increase in working capitalEUR 46.2mEUR 49.3mEUR 52.5mEUR 55.9mEUR 59.6m-6.5%
    Free cashflow to firmEUR 1.6bnEUR 1.7bnEUR 1.8bnEUR 1.9bnEUR 2.0bn+6.5%
    Discount factor0.95790.87890.80650.74000.6790-
    Present valueEUR 1.5bnEUR 1.5bnEUR 1.4bnEUR 1.4bnEUR 1.4bn-2.2%
    Present Value Of The ForecastEUR 7.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.20%USD assumption - no free live source available for this market (assumption)
    Equity risk premium6.50%Market assumption
    Beta0.851Reported 0.778, pulled toward 1.0 (Blume)
    Cost of equity9.73%Risk-free + beta x equity risk premium
    Cost of debt4.20%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationEUR 26.5bn88.6% of capital
    Total debtEUR 3.4bn11.4% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC8.98%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 shareEUR 12.66

    73% of EV

    Forecast FCFF, final year
    EUR 2.0bn
    Capex at depreciation, working capital in reinvestment
    EUR 2.1bn
    Less reinvestment at g/ROIC (11.7% of NOPAT)
    EUR -243.2m
    Capitalised
    EUR 1.8bn
    ROIC (reported)
    21.3%
    Terminal value, undiscounted
    EUR 28.9bn
    Terminal value, discounted
    EUR 19.6bn
    Enterprise value
    EUR 26.8bn
    Less net debt
    EUR 3.3bn
    Equity value
    EUR 23.5bn

    Exit at 11.5x EBITDA

    Value per shareEUR 15.85

    78% of EV

    Terminal value, undiscounted
    EUR 37.7bn
    Terminal value, discounted
    EUR 25.6bn
    Enterprise value
    EUR 32.7bn
    Less net debt
    EUR 3.3bn
    Equity value
    EUR 29.4bn

    Spread between methods: 22%.

    Sensitivity

    Value per share (EUR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.98%16.4417.5518.9020.5822.74
    7.98%13.6714.3815.2116.2117.42
    8.98%11.6312.1112.6613.2914.04
    9.98%10.0810.4110.7911.2111.70
    10.98%8.859.099.359.659.98

    Outlined: this model. Green text: above today's price of 14.75. 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 year6.5%9.7%+3.2pp
    EBIT margin15.5%17.8%+2.3pp
    Discount rate9.0%8.1%-0.8pp
    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.