Casey's General Stores' estimated fair value is US$377 based on 2 Stage Free Cash Flow to Equity
With US$364 share price, Casey's General Stores appears to be trading close to its estimated fair value
The US$388 analyst price target for CASY is 2.9% more than our estimate of fair value
In this article we are going to estimate the intrinsic value of Casey's General Stores, Inc. (NASDAQ:CASY) by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
The Calculation
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) forecast
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF ($, Millions)
US$372.3m
US$469.7m
US$568.3m
US$534.2m
US$557.8m
US$577.3m
US$595.6m
US$613.0m
US$630.0m
US$646.7m
Growth Rate Estimate Source
Analyst x3
Analyst x5
Analyst x2
Analyst x1
Analyst x1
Est @ 3.50%
Est @ 3.16%
Est @ 2.93%
Est @ 2.76%
Est @ 2.65%
Present Value ($, Millions) Discounted @ 6.1%
US$351
US$418
US$476
US$422
US$416
US$406
US$395
US$383
US$371
US$359
("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = US$4.0b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.4%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.1%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$18b÷ ( 1 + 6.1%)10= US$10.0b
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$14b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of US$364, the company appears about fair value at a 3.5% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
NasdaqGS:CASY Discounted Cash Flow July 11th 2024
Important Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. 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 Casey's General Stores 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 6.1%, which is based on a levered beta of 0.800. 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.
SWOT Analysis for Casey's General Stores
Strength
Debt is well covered by earnings and cashflows.
Balance sheet summary for CASY.
Weakness
Earnings growth over the past year underperformed the Consumer Retailing industry.
Dividend is low compared to the top 25% of dividend payers in the Consumer Retailing market.
Opportunity
Annual earnings are forecast to grow for the next 3 years.
Current share price is below our estimate of fair value.
Threat
Annual earnings are forecast to grow slower than the American market.
What else are analysts forecasting for CASY?
Moving On:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. It's not possible to obtain a foolproof valuation with a DCF model. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Casey's General Stores, we've compiled three important aspects you should further examine:
Risks: To that end, you should be aware of the 1 warning sign we've spotted with Casey's General Stores .
Future Earnings: How does CASY'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 High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
主要见解
基于两阶段自由现金流的股权估价,Casey's General Stores的预估公允价值为377美元。
以364美元的股价来看,Casey's General Stores的交易价格接近预估的公允价值。
CASU的分析师目标价388美元比我们的公允值估算高2.9%。
在本文中,我们将通过预测Casey's General Stores公司未来的现金流并将其贴现至今天的价值来估计其内在价值。我们将使用贴现现金流量(DCF)模型完成这一估算。在你认为自己不能理解它之前请继续阅读!它实际上比你想象的要简单得多。
终端价值的现值(PVTV)= TV / ( 1 + r )10= 180亿美元÷(1 + 6.1%)10= 100亿美元
因此,Casey's General Stores的总价值或股本价值,是未来现金流的现值之和,也就是140亿美元。最后一步,我们把股本价值除以流通股数。与当前的股价364美元相比,该公司看起来交易价格合理,目前股价降价了3.5%。请记住,这只是一个近似估值,就像任何复杂的公式一样,可能会有偏差。
纳斯达克股市:CASY贴现现金流2024年7月11日
重要假设
上述计算非常依赖于两个假设,第一个是折现率,另一个是现金流量。你不必同意这些输入,我建议你自己重新计算并进行调整。DCF模型也没有考虑行业可能的周期性或公司未来的资本需求,因此它不会提供完整的公司潜力表现画面。鉴于我们正在看Casey's General Stores作为潜在的股东,所以使用的是股权成本,而不是(债务成本或加权平均成本,WACC),来作为贴现率。在这个计算中,我们使用了6.1%的贴现率,这是基于一个杠杆贝塔为0.800的全球可比公司行业平均贝塔的设定范围0.8到2.0之间,这是一个稳定业务的合理范围。
Casey's General Stores的SWOT分析
优势
债务得到充分覆盖,收入和现金流决定了债务水平。
CASY的资产负债表概要。
弱点
过去一年的盈利增长表现不及消费零售行业板块。
与消费零售市场前25%的分红支付者相比,该公司的股息较低。
机会
预计未来3年的年度收益将增长。
当前股价低于我们估计的公平价值。
威胁
预计年度收益增长速度将慢于美国市场。
分析师还预测了CASY的什么?
接下来:
虽然公司的估值很重要,但不应该是你研究公司时关注的唯一指标。DCF模型无法获得完美的估值,因为它只是验证假设和理论是否会导致公司被低估或高估的最佳方式。例如,公司的股权成本或无风险利率的变化可以对估值产生重大影响。对于Casey's General Stores,我们已经编制了三个你应该进一步检查的重要方面。