DCF Studio

    WMB · NYQ · Energy

    The Williams Companies, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 11.87

    Market price

    USD 72.05

    Implied upside

    -83.5%

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

    AdjustedCapital expenditure runs at 27.9% of revenue against depreciation of 19.5%. 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 11.87-83.5%
    Exit multiple
    USD 58.11-19.4%
    Market price
    USD 72.05

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 12.3bnUSD 12.7bnUSD 13.0bnUSD 13.4bnUSD 13.8bn+2.9%
    EBITUSD 4.1bnUSD 4.3bnUSD 4.4bnUSD 4.5bnUSD 4.6bn+2.9%
    NOPATUSD 3.3bnUSD 3.4bnUSD 3.5bnUSD 3.6bnUSD 3.7bn+2.9%
    Add depreciation & amortisationUSD 2.4bnUSD 2.5bnUSD 2.5bnUSD 2.6bnUSD 2.7bn+2.9%
    Less capital expenditureUSD -3.4bnUSD -3.5bnUSD -3.6bnUSD -3.7bnUSD -3.9bn+2.9%
    Less increase in working capitalUSD -39.4mUSD -40.5mUSD -41.7mUSD -42.9mUSD -44.2m+2.9%
    Free cashflow to firmUSD 2.2bnUSD 2.3bnUSD 2.3bnUSD 2.4bnUSD 2.5bn+2.9%
    Discount factor0.96300.89310.82830.76810.7124-
    Present valueUSD 2.1bnUSD 2.0bnUSD 1.9bnUSD 1.8bnUSD 1.8bn-4.6%
    Present Value Of The ForecastUSD 9.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.744Reported 0.618, pulled toward 1.0 (Blume)
    Cost of equity9.09%Risk-free + beta x equity risk premium
    Cost of debt5.12%Interest expense / average total debt
    Market capitalisationUSD 88.1bn75.0% of capital
    Total debtUSD 29.4bn25.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC7.83%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 11.87

    78% of EV

    Forecast FCFF, final year
    USD 2.5bn
    Capex at depreciation, working capital in reinvestment
    USD 3.7bn
    Less reinvestment at g/ROIC (31.9% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 2.5bn
    ROIC (WACC floor)
    7.8%
    Terminal value, undiscounted
    USD 48.0bn
    Terminal value, discounted
    USD 34.2bn
    Enterprise value
    USD 43.9bn
    Less net debt
    USD 29.3bn
    Equity value
    USD 14.5bn

    Exit at 17.4x EBITDA

    Value per shareUSD 58.11

    90% of EV

    Terminal value, undiscounted
    USD 127.5bn
    Terminal value, discounted
    USD 90.9bn
    Enterprise value
    USD 100.5bn
    Less net debt
    USD 29.3bn
    Equity value
    USD 71.2bn

    Spread between methods: 132%.

    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%
    5.83%27.9829.8632.2635.4639.96
    6.83%18.1318.7419.4720.3421.44
    7.83%11.5911.7311.8712.0012.14
    8.83%7.297.417.527.647.75
    9.83%3.883.984.084.184.28

    Outlined: this model. Green text: above today's price of 72.05. 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 year2.9%27.8%+24.9pp
    EBIT margin33.7%84.7%+51.1pp
    Discount rate7.8%4.4%-3.4pp
    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.