DCF Studio

    USB · NYQ · Financial Services

    U.S. Bancorp

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 59.43

    Market price

    USD 60.06

    Implied upside

    -1.0%

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

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.37% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 59.43-1.0%
    Exit multiple
    USD 68.67+14.3%
    Market price
    USD 60.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 30.2bnUSD 31.9bnUSD 33.7bnUSD 35.6bnUSD 37.6bn+5.7%
    EBITUSD 8.8bnUSD 9.3bnUSD 9.8bnUSD 10.4bnUSD 11.0bn+5.7%
    NOPATUSD 7.0bnUSD 7.4bnUSD 7.9bnUSD 8.3bnUSD 8.8bn+5.7%
    Add depreciation & amortisationUSD 938.8mUSD 992.1mUSD 1.0bnUSD 1.1bnUSD 1.2bn+5.7%
    Less capital expenditureUSD -412.0mUSD -435.4mUSD -460.1mUSD -486.3mUSD -513.9m+5.7%
    Less increase in working capitalUSD 0.00USD 0.00USD 0.00USD 0.00USD 0.00-
    Free cashflow to firmUSD 7.6bnUSD 8.0bnUSD 8.5bnUSD 8.9bnUSD 9.4bn+5.7%
    Discount factor0.96060.88650.81810.75490.6967-
    Present valueUSD 7.3bnUSD 7.1bnUSD 6.9bnUSD 6.7bnUSD 6.6bn-2.5%
    Present Value Of The ForecastUSD 34.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.981Reported 0.971, pulled toward 1.0 (Blume)
    Cost of equity10.39%Risk-free + beta x equity risk premium
    Cost of debt7.00%Implied cost of debt of 21.4% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationUSD 93.6bn57.8% of capital
    Total debtUSD 68.4bn42.2% of capital, book value as a proxy
    Tax rate20.1%Effective, capped at statutory
    WACC8.36%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 59.43

    70% of EV

    Forecast FCFF, final year
    USD 9.4bn
    Capex at depreciation, working capital in reinvestment
    USD 9.3bn
    Less reinvestment at g/ROIC (29.9% of NOPAT)
    USD -2.8bn
    Capitalised
    USD 6.5bn
    ROIC (WACC floor)
    8.4%
    Terminal value, undiscounted
    USD 114.1bn
    Terminal value, discounted
    USD 79.5bn
    Enterprise value
    USD 114.1bn
    Less net debt
    USD 21.5bn
    Equity value
    USD 92.6bn

    Exit at 11.1x EBITDA

    Value per shareUSD 68.67

    73% of EV

    Terminal value, undiscounted
    USD 134.8bn
    Terminal value, discounted
    USD 93.9bn
    Enterprise value
    USD 128.5bn
    Less net debt
    USD 21.5bn
    Equity value
    USD 107.0bn

    Spread between methods: 14%.

    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%
    6.36%81.6782.0282.3882.7483.09
    7.36%68.7569.0569.3469.6469.93
    8.36%58.9359.1859.4359.6859.93
    9.36%51.2251.4351.6451.8652.07
    10.36%44.9945.1845.3645.5545.73

    Outlined: this model. Green text: above today's price of 60.06. 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 year5.7%5.9%+0.2pp
    EBIT margin29.2%29.5%+0.3pp
    Discount rate8.4%8.3%-0.1pp
    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.