Delek US Holdings' estimated fair value is US$24.42 based on 2 Stage Free Cash Flow to Equity
Current share price of US$20.02 suggests Delek US Holdings is potentially trading close to its fair value
The US$23.46 analyst price target for DK is 3.9% less than our estimate of fair value
Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Delek US Holdings, Inc. (NYSE:DK) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!
We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
Is Delek US Holdings Fairly Valued?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) estimate
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF ($, Millions)
US$207.0m
US$174.7m
US$156.9m
US$146.9m
US$141.5m
US$138.8m
US$138.1m
US$138.6m
US$140.0m
US$142.0m
Growth Rate Estimate Source
Analyst x2
Est @ -15.61%
Est @ -10.18%
Est @ -6.37%
Est @ -3.71%
Est @ -1.85%
Est @ -0.54%
Est @ 0.37%
Est @ 1.01%
Est @ 1.46%
Present Value ($, Millions) Discounted @ 11%
US$187
US$142
US$116
US$97.7
US$84.9
US$75.3
US$67.6
US$61.3
US$55.9
US$51.2
("Est" = FCF growth rate estimated by Simply Wall St) Present Value of 10-year Cash Flow (PVCF) = US$939m
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 (2.5%) 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 11%.
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$1.8b÷ ( 1 + 11%)10= US$637m
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$1.6b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of US$20.0, the company appears about fair value at a 18% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.
Important Assumptions
We would point out that 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 Delek US Holdings 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 11%, which is based on a levered beta of 2.000. 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 Delek US Holdings
Strength
Debt is well covered by cash flow.
Dividend is in the top 25% of dividend payers in the market.
Dividend information for DK.
Weakness
Interest payments on debt are not well covered.
Opportunity
Forecast to reduce losses next year.
Has sufficient cash runway for more than 3 years based on current free cash flows.
Good value based on P/S ratio and estimated fair value.
Threat
Paying a dividend but company is unprofitable.
Revenue is forecast to decrease over the next 2 years.
See DK's dividend history.
Moving On:
Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. 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 instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Delek US Holdings, we've compiled three essential aspects you should further research:
Risks: We feel that you should assess the 2 warning signs for Delek US Holdings (1 is significant!) we've flagged before making an investment in the company.
Future Earnings: How does DK'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. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks 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.
主要见解
Delek US Holdings的估计公允价值是24.42美元,基于2阶段自由现金流对股权的折现
当前的股价为20.02美元,这表明Delek US Holdings有可能接近其公允价值
对Dk的分析师价格目标为23.46美元,比我们的公允价值估计低3.9%
今天我们将简要介绍一种估计Delek US Holdings, Inc. (NYSE:DK)投资机会吸引力的估值方法,即将预期未来现金流折现为现值。一种实现这一目标的方法是使用折现现金流量(DCF)模型。不论你相信与否,从我们的例子中可以看出,它并不难理解!
我们要指出的是,折现现金流的最重要输入是折现率和实际现金流。投资的一部分就是对公司未来业绩进行自己评估,所以请自己尝试进行计算并检查自己的假设。DCF也没有考虑行业的可能周期性,或者公司未来的资本需求,因此无法完全展现公司的潜力。鉴于我们正在考虑的是Delek US Holdings作为潜在股东,因此将股权成本用作折现率,而不是公司成本(或加权平均资本成本,WACC),后者考虑了债务。在这个计算中,我们使用了11%,这是基于2.000的负债贝塔。贝塔是一种衡量股票与整个市场波动性的指标。我们的贝塔值来自全球可比公司的行业平均贝塔,强制设定在0.8至2.0之间,这是一个稳定业务的合理范围。
delek us控股的SWOt分析
优势
债务由现金流很好覆盖。
股息在市场上支付的股息的前25%。
Dk的股息信息。
弱势
债务利息支付能力不太好。
机会
预计明年减少亏损。
根据当前自由现金流,财务运营资金足够支撑三年以上。
根据市销率和估计的公平价值,TWKS的价值很好。
威胁
虽然公司未盈利,但正在支付股息。
营业收入预计在未来2年内下降。
查看DK的股息历史记录。
接下来:
尽管重要,现金流折现计算只是你需要评估公司的许多因素之一。现金流折现模型并非是完美的股票估值工具。相反,现金流折现模型的最佳用途是测试某些假设和理论,看它们是否会导致公司被低估或高估。例如,如果终值增长率略有调整,可能会显著改变整体结果。对于Delek US Holdings,我们已经整理出了三个必要的方面,你应该进一步研究:
风险:我们认为在投资该公司之前,您应该评估Delek US Holdings的2个警示标志(1个非常重要!)