In this article we are going to estimate the intrinsic value of Allegion plc (NYSE:ALLE) by projecting its future cash flows and then discounting them to today's value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
Check out our latest analysis for Allegion
The Model
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) estimate
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
Levered FCF ($, Millions) | US$531.7m | US$531.0m | US$533.6m | US$538.6m | US$545.2m | US$553.1m | US$561.9m | US$571.4m | US$581.5m | US$592.1m |
Growth Rate Estimate Source | Analyst x2 | Est @ -0.12% | Est @ 0.49% | Est @ 0.93% | Est @ 1.23% | Est @ 1.44% | Est @ 1.59% | Est @ 1.7% | Est @ 1.77% | Est @ 1.82% |
Present Value ($, Millions) Discounted @ 8.1% | US$492 | US$454 | US$422 | US$394 | US$369 | US$347 | US$326 | US$307 | US$289 | US$272 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$3.7b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 1.9%. We discount the terminal cash flows to today's value at a cost of equity of 8.1%.
Terminal Value (TV)= FCF2032 × (1 + g) ÷ (r – g) = US$592m× (1 + 1.9%) ÷ (8.1%– 1.9%) = US$9.8b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$9.8b÷ ( 1 + 8.1%)10= US$4.5b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$8.2b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$90.6, the company appears about fair value at a 2.6% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
NYSE:ALLE Discounted Cash Flow September 23rd 2022
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Allegion as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.1%, which is based on a levered beta of 1.212. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
Moving On:
Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Allegion, we've put together three important factors you should assess:
- Risks: You should be aware of the 2 warning signs for Allegion (1 doesn't sit too well with us!) we've uncovered before considering an investment in the company.
- Future Earnings: How does ALLE's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
在本文中,我们将通过预测未来的现金流并将其折现为今天的价值来估计Alcion plc(纽约证券交易所代码:ALLE)的内在价值。为此,我们将利用贴现现金流(DCF)模型。像这样的模型可能看起来超出了外行的理解,但它们很容易被效仿。
不过请记住,有很多方法可以评估一家公司的价值,贴现现金流只是其中一种方法。如果你想了解更多关于贴现现金流的信息,可以在Simply Wall St.分析模型中详细阅读这种计算背后的原理。
查看我们对Alcion的最新分析
模型
我们使用的是两阶段增长模型,也就是说,我们考虑了公司发展的两个阶段。在初期,公司可能有较高的增长率,而第二阶段通常被假设为有一个稳定的增长率。首先,我们必须对未来十年的现金流进行估计。在可能的情况下,我们使用分析师的估计,但当这些估计不可用时,我们会根据上次估计或报告的价值推断先前的自由现金流(FCF)。我们假设,自由现金流萎缩的公司将减缓收缩速度,而自由现金流增长的公司在这段时间内的增长速度将放缓。我们这样做是为了反映出,增长在最初几年往往比后来几年放缓得更多。
贴现现金流就是这样一种想法,即未来一美元的价值低于现在的一美元,因此我们需要对这些未来现金流的总和进行贴现,以得出现值估计:
10年自由现金流(FCF)估计
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
杠杆式FCF(百万美元) | 5.317亿美元 | 5.310亿美元 | 5.336亿美元 | 5.386亿美元 | 5.452亿美元 | 5.531亿美元 | 5.619亿美元 | 5.714亿美元 | 5.815亿美元 | 5.921亿美元 |
增长率预估来源 | 分析师x2 | Est@-0.12% | Est@0.49% | Est@0.93% | Est@1.23% | Est@1.44% | Est@1.59% | Est@1.7% | Est@1.77% | Est@1.82% |
现值(美元,百万)贴现@8.1% | 492美元 | 454美元 | 422美元 | 394美元 | 369美元 | 347美元 | 326美元 | 307美元 | 289美元 | 272美元 |
(“EST”=Simply Wall St.预估的FCF成长率)
10年期现金流现值(PVCF)=37亿美元
第二阶段也被称为终端价值,这是企业在第一阶段之后的现金流。戈登增长公式用于计算终端价值,其未来年增长率等于10年期政府债券收益率1.9%的5年平均水平。我们以8.1%的权益成本将终端现金流贴现到今天的价值。
终端值(TV)=FCF2032×(1+g)?(r-g)=5.92亿美元×(1+1.9%)?(8.1%-1.9%)=98亿美元
终值现值(PVTV)=TV/(1+r)10=98亿美元?(1+8.1%)10=45亿美元
那么,总价值或权益价值就是未来现金流的现值之和,在这种情况下,现金流的现值为82亿美元。最后一步是将股权价值除以流通股数量。与目前90.6美元的股价相比,该公司的公允价值似乎比目前的股价有2.6%的折扣。然而,估值是不精确的工具,更像是一台望远镜--移动几度,就会到达另一个星系。一定要记住这一点。
纽约证券交易所:ALLE贴现现金流2022年9月23日
假设
现在,贴现现金流最重要的投入是贴现率,当然还有实际现金流。投资的一部分是你自己对一家公司未来业绩的评估,所以你自己试一试计算,检查你自己的假设。DCF也没有考虑一个行业可能的周期性,也没有考虑一家公司未来的资本要求,因此它没有给出一家公司潜在业绩的全貌。鉴于我们将Alcion视为潜在股东,股权成本被用作贴现率,而不是占债务的资本成本(或加权平均资本成本,WACC)。在这个计算中,我们使用了8.1%,这是基于杠杆率为1.212的测试版。贝塔系数是衡量一只股票相对于整个市场的波动性的指标。我们的贝塔系数来自全球可比公司的行业平均贝塔系数,强制限制在0.8到2.0之间,这是一个稳定业务的合理范围。
下一步:
就构建你的投资论点而言,估值只是硬币的一面,它只是你需要为一家公司评估的众多因素之一。用贴现现金流模型不可能获得万无一失的估值。相反,它应该被视为“什么假设需要成立才能让这只股票被低估或高估”的指南。例如,如果终端价值增长率稍有调整,可能会极大地改变整体结果。对于Alcion,我们列出了你应该评估的三个重要因素:
- 风险:你应该意识到Alcion的2个警告标志(%1与我们的关系不太好!)我们在考虑投资该公司之前发现了这一点。
- 未来收益:与同行和更广泛的市场相比,Alle的增长率如何?通过与我们的免费分析师增长预期图表互动,更深入地挖掘分析师对未来几年的共识数字。
- 其他稳固的企业:低债务、高股本回报率和良好的过去业绩是强劲业务的基础。为什么不探索我们具有坚实商业基本面的股票的互动列表,看看是否有其他您可能没有考虑过的公司!
PS.Simply Wall St.每天更新每只美国股票的贴现现金流计算,所以如果你想找出任何其他股票的内在价值,只需搜索此处。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。