Monday, January 28, 2013

Rockwell Collins Inc: $COL Cash Flow Valuation Update


Current Price: ~ $59/share
Yield: ~ 2.02%


Rockwell Collins, Inc. designs, produces & supports communications & aviation electronics for commercial & military customers. Its products & services include cabin management systems, radar & surveillance, field support, spares & parts, among others.         


Estimated WACC for the firm today is 9.76% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:
Year
FCF $Millions
2003
302
2004
296
2005
456
2006
451
2007
474
2008
441
2009
478
2010
595
2011
501
2012
392




Average Annual Growth FCF: ~ 5%
CAGR FCF: ~ 3%
Consensus Forecast Industry 5-Year Growth: ~ 11% per year
Consensus Forecast Company 5-Year Growth: ~ 10% per year
Internal Growth Rate: ~ 8%
Sustainable Growth Rate: ~ 41%

Scenario 1
Average FCF (past 5 years) is $481 million
  • Start at $481 million FCF
  • Assume a 5-year growth rate in FCF of 9% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
481
1
524
2
571
3
623
4
679
5
740
Terminal Value
8267


The firm's future free cash flows, discounted at a WACC of 9.76%, give a present value for the entire firm (Debt + Equity) of $7546 million. If the firm's fair value of debt is estimated at $837 million, then the fair value of the firm's equity could be $6709 million.  $6709 million / 137 million outstanding shares is approximately $49 per share and a 20% margin of safety is $39/share.


Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 9% per year, then 2% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
481
1
524
2
571
3
623
4
679
5
740
Terminal Value
10399


  • Present Value of the entire firm (Debt + Equity): $8884 million
  • Value of Equity: $8047 million or $59/share
  • 20% margin of safety is $47/share


Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Friday, January 25, 2013

Becton Dickinson & Co: $BDX Cash Flow Valuation Update


Current Price: ~ $85/share
Yield: ~ 2.20%

Becton, Dickinson & Co., is engaged in manufacturing and sale of medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions, life science researchers, clinical laboratories, industry and the general public.     


Estimated WACC for the firm today is 7.93% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:
Year
FCF $Millions
2003
645
2004
832
2005
909
2006
594
2007
662
2008
1036
2009
1016
2010
1112
2011
1111
2012
1207




Average Annual Growth FCF: ~ 10%
CAGR FCF: ~ 7%
Consensus Forecast Industry 5-Year Growth: ~ 16% per year
Consensus Forecast Company 5-Year Growth: ~ 7% per year
Internal Growth Rate: ~ 8%
Sustainable Growth Rate: ~ 22%

Scenario 1
Average FCF (2012, 2011, 2010) is $1143 million
  • Start at $1143 million FCF
  • Assume a 5-year growth rate in FCF of 7% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
1143
1
1223
2
1309
3
1400
4
1498
5
1603
Terminal Value
21635


The firm's future free cash flows, discounted at a WACC of 7.93%, give a present value for the entire firm (Debt + Equity) of $20342 million. If the firm's fair value of debt is estimated at $4317 million, then the fair value of the firm's equity could be $16025 million.  $16025 million / 197 million outstanding shares is approximately $81 per share and a 20% margin of safety is $65/share.


Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 7% per year, then 2% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
1143
1
1223
2
1309
3
1400
4
1498
5
1603
Terminal Value
28933


  • Present Value of the entire firm (Debt + Equity): $25326 million
  • Value of Equity: $21009 million or $107/share
  • 20% margin of safety is $86/share


Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Thursday, January 24, 2013

World Champion Brilliancy

Grandmaster Levon Aronian vs World Champion Viswanathan Anand
2013 Tata Steel Chess Tournament (Kingscrusher)


AmerisourceBergen Corp: $ABC Cash Flow Valuation Update


Current Price: ~ $46/share
Yield: ~ 1.30%


AmerisourceBergen Corporation is a pharmaceutical services company providing drug distribution and related healthcare services and solutions to pharmacy, physician, and manufacturer customers, which are based mainly in the United States and Canada.          


Estimated WACC for the firm today is 6.88% using the Capital Asset Pricing Model and the company's recent SEC filings.

Recent free cash flows and noted growth rates:
Year
FCF $Millions
2003
264
2004
636
2005
1323
2006
694
2007
1090
2008
600
2009
638
2010
924
2011
1000
2012
1141




Average Annual Growth FCF: ~ 32%
CAGR FCF: ~ 18%
Consensus Forecast Industry 5-Year Growth: ~ 16% per year
Consensus Forecast Company 5-Year Growth: ~ 12% per year
Internal Growth Rate: ~ 4%
Sustainable Growth Rate: ~ 28%

Scenario 1
Average FCF (past five years) is $861 million
  • Start at $861 million FCF
  • Assume a 5-year growth rate in FCF of 12% per year, then no growth or 0% growth in FCF per year forever:

Discounted Cash Flow Valuation
Year
FCF $Millions
0
861
1
964
2
1080
3
1210
4
1355
5
1517
Terminal Value
24684


The firm's future free cash flows, discounted at a WACC of 6.88%, give a present value for the entire firm (Debt + Equity) of $22658 million. If the firm's fair value of debt is estimated at $1636 million, then the fair value of the firm's equity could be $21022 million.  $21022 million / 235 million outstanding shares is approximately $89 per share and a 20% margin of safety is $71/share.


Scenario 2
All else being equal,
  • Assume a 5-year growth rate in FCF of 4% per year, then 0% growth in FCF per year forever:

Discounted Cash Flow Valuation

Year
FCF $Millions
0
861
1
895
2
931
3
969
4
1007
5
1048
Terminal Value
15824


  • Present Value of the entire firm (Debt + Equity): $15312 million
  • Value of Equity: $13676 million or $58/share
  • 20% margin of safety is $46/share


Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.