DCF Studio

    WELL · NYQ · Real Estate

    Welltower Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 26.53

    Market price

    USD 228.87

    Implied upside

    -88.4%

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

    AdjustedReported capital expenditure averages just 0.59% 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 21.16% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Current EV/EBITDA of 72.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 26.53-88.4%
    Exit multiple
    USD 182.74-20.2%
    Market price
    USD 228.87

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 13.1bnUSD 16.1bnUSD 19.7bnUSD 24.2bnUSD 29.7bn+22.7%
    EBITUSD 1.5bnUSD 1.8bnUSD 2.2bnUSD 2.7bnUSD 3.4bn+22.7%
    NOPATUSD 1.5bnUSD 1.8bnUSD 2.2bnUSD 2.7bnUSD 3.3bn+22.7%
    Add depreciation & amortisationUSD 2.8bnUSD 3.5bnUSD 4.3bnUSD 5.2bnUSD 6.4bn+22.7%
    Less capital expenditureUSD -2.8bnUSD -3.4bnUSD -4.2bnUSD -5.1bnUSD -6.3bn+22.7%
    Less increase in working capitalUSD -241.5mUSD -296.3mUSD -363.6mUSD -446.1mUSD -547.3m+22.7%
    Free cashflow to firmUSD 1.3bnUSD 1.6bnUSD 1.9bnUSD 2.4bnUSD 2.9bn+22.7%
    Discount factor0.95750.87790.80480.73790.6765-
    Present valueUSD 1.2bnUSD 1.4bnUSD 1.6bnUSD 1.8bnUSD 2.0bn+12.5%
    Present Value Of The ForecastUSD 7.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.839Reported 0.760, pulled toward 1.0 (Blume)
    Cost of equity9.61%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 164.9bn88.5% of capital
    Total debtUSD 21.4bn11.5% of capital, book value as a proxy
    Tax rate1.8%Effective, capped at statutory
    WACC9.07%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 26.53

    77% of EV

    Forecast FCFF, final year
    USD 2.9bn
    Capex at depreciation, working capital in reinvestment
    USD 3.5bn
    Less reinvestment at g/ROIC (27.6% of NOPAT)
    USD -954.0m
    Capitalised
    USD 2.5bn
    ROIC (WACC floor)
    9.1%
    Terminal value, undiscounted
    USD 39.1bn
    Terminal value, discounted
    USD 26.5bn
    Enterprise value
    USD 34.4bn
    Less net debt
    USD 16.3bn
    Equity value
    USD 18.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 182.74

    94% of EV

    Terminal value, undiscounted
    USD 196.0bn
    Terminal value, discounted
    USD 132.6bn
    Enterprise value
    USD 140.5bn
    Less net debt
    USD 16.3bn
    Equity value
    USD 124.2bn

    Spread between methods: 149%.

    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%
    7.07%41.9542.2242.4842.7543.01
    8.07%33.0533.2833.5033.7233.94
    9.07%26.1526.3426.5326.7226.91
    10.07%20.6320.8020.9621.1321.29
    11.07%16.1416.2816.4316.5716.71

    Outlined: this model. Green text: above today's price of 228.87. 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 year22.7%73.9%+51.2pp
    EBIT margin11.3%57.0%+45.6pp
    Discount rate9.1%2.7%-6.4pp
    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.