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 5Year Growth: ~ 16% per year
Consensus Forecast Company 5Year Growth: ~ 7% per year
Internal Growth Rate: ~ 8%
Sustainable Growth Rate: ~ 22%
Scenario 1
Average FCF (2012, 2011, 2010) is $1143 million
Average FCF (2012, 2011, 2010) is $1143 million
 Start at $1143 million FCF
 Assume a 5year growth rate in FCF of 7% per year, then no growth or 0% growth in FCF per year forever:
Discounted Cash Flow Valuation
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.
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,
All else being equal,
 Assume a 5year 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.
Hi Guys, I found a Website to perform Discounted Cash Flow Model calculations, no need to do those calculations on the Excel file anymore, check it out:
ReplyDeletehttp://turnkeyanalyst.com/2013/09/19/cloudbaseddiscountedcashflowanalysistool/