DCF Studio

    WOW.AX · ASX · Consumer Defensive

    Woolworths Group Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD -12.95

    Market price

    AUD 38.23

    Implied upside

    -133.9%

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

    Wrong toolThis line has no market capitalisation, which means it is not ordinary shares - typically a hybrid, preference line, note or unlisted stub. A discounted cashflow values a claim on the whole business, so applying it here attributes all of the group’s revenue to a security that has no such claim. Its value is its coupon and call schedule. Look up the ordinary line instead.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.

    No usable EV/EBITDA (EBITDA is not positive), so the exit multiple falls back to 8x.

    Value Per Share

    Perpetuity growth
    AUD -12.95-133.9%
    Exit multiple
    AUD 2.26-94.1%
    Market price
    AUD 38.23

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    -225150894-1125754470FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 74.1bnAUD 76.8bnAUD 79.6bnAUD 82.5bnAUD 85.5bn+3.6%
    EBITAUD -506.1mAUD -524.4mAUD -543.4mAUD -563.1mAUD -583.5m-3.6%
    NOPATAUD -354.3mAUD -367.1mAUD -380.4mAUD -394.2mAUD -408.5m-3.6%
    Add depreciation & amortisationAUD 2.9bnAUD 3.0bnAUD 3.1bnAUD 3.2bnAUD 3.3bn+3.6%
    Less capital expenditureAUD -2.7bnAUD -2.8bnAUD -2.9bnAUD -3.0bnAUD -3.1bn+3.6%
    Less increase in working capitalAUD -10.5mAUD -10.9mAUD -11.3mAUD -11.7mAUD -12.1m+3.6%
    Free cashflow to firmAUD -195.3mAUD -202.3mAUD -209.7mAUD -217.3mAUD -225.2m-3.6%
    Discount factor0.98180.94640.91220.87930.8476-
    Present valueAUD -191.7mAUD -191.5mAUD -191.3mAUD -191.1mAUD -190.8m+0.1%
    Present Value Of The ForecastAUD -956.4m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.507Reported 0.264, pulled toward 1.0 (Blume)
    Cost of equity8.39%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationAUD 0.000.0% of capital
    Total debtAUD 16.5bn100.0% of capital, book value as a proxy
    Tax rate30.0%Effective, capped at statutory
    WACC3.74%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 shareAUD -12.95

    0% of EV

    Terminal value, undiscounted
    AUD 0.00
    Terminal value, discounted
    AUD 0.00
    Enterprise value
    AUD -956.4m
    Less net debt
    AUD 15.0bn
    Equity value
    AUD -15.9bn

    Exit at 8.0x EBITDA

    Value per shareAUD 2.26

    105% of EV

    Terminal value, undiscounted
    AUD 22.1bn
    Terminal value, discounted
    AUD 18.7bn
    Enterprise value
    AUD 17.8bn
    Less net debt
    AUD 15.0bn
    Equity value
    AUD 2.8bn

    Sensitivity

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

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    1.74%-12.99————
    2.74%-12.97-12.97-12.97——
    3.74%-12.95-12.95-12.95-12.95-12.95
    4.74%-12.94-12.94-12.94-12.94-12.94
    5.74%-12.92-12.92-12.92-12.92-12.92

    Outlined: this model. Green text: above today's price of 38.23. 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
    EBIT margin-0.7%3.7%+4.4pp
    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.