Projected Yield: ~ 2.11%
Becton, Dickinson is the world's largest manufacturer and distributor of medical surgical products, such as needles, syringes, and sharps-disposal units. The company also manufactures diagnostic instruments and reagents, as well as flow cytometry and cell imaging systems. International revenue accounts for 55% of the company's business.
I estimated the firm's WACC today at 8.66% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2001 | 408 |
2002 | 576 |
2003 | 645 |
2004 | 832 |
2005 | 909 |
2006 | 594 |
2007 | 662 |
2008 | 1036 |
2009 | 1126 |
2010 | 1207 |
TTM | 1310 |
Average Annual Growth FCF: approx. 16%
CAGR FCF: approx. 13%
Consensus Forecast Industry 5-Year Growth: approx. 17% per yearConsensus Forecast Company 5-Year Growth: approx. 10% per year
Assuming the company achieves a 5-year growth rate in FCF of 10% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 1310 |
1 | 1441 |
2 | 1585 |
3 | 1744 |
4 | 1918 |
5 | 2110 |
Terminal Value | 26805 |
The firm's future cash flows, discounted at a WACC of 8.66%, give a present value for the entire firm (Debt + Equity) of $24,494 million. If the firm's fair value of debt is estimated at $2842 million, then the fair value of the firm's equity could be $21,652 million. $21,652 million / 221 million outstanding shares is approximately $98 per share and a 20% margin of safety is $78/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment