Is There An Opportunity With IDEX Corporation's (NYSE:IEX) 22% Undervaluation?
Is There An Opportunity With IDEX Corporation's (NYSE:IEX) 22% Undervaluation?
Key Insights
- Using the 2 Stage Free Cash Flow to Equity, IDEX fair value estimate is US$311
- IDEX is estimated to be 22% undervalued based on current share price of US$244
- The US$236 analyst price target for IEX is 24% less than our estimate of fair value
How far off is IDEX Corporation (NYSE:IEX) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
The Method
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$621.3m | US$724.0m | US$775.4m | US$931.2m | US$1.11b | US$1.23b | US$1.33b | US$1.42b | US$1.49b | US$1.56b |
Growth Rate Estimate Source | Analyst x7 | Analyst x6 | Analyst x4 | Analyst x2 | Analyst x1 | Est @ 10.97% | Est @ 8.37% | Est @ 6.54% | Est @ 5.27% | Est @ 4.37% |
Present Value ($, Millions) Discounted @ 7.2% | US$580 | US$630 | US$629 | US$705 | US$781 | US$808 | US$817 | US$812 | US$797 | US$776 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$7.3b
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 (2.3%) 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 7.2%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$1.6b× (1 + 2.3%) ÷ (7.2%– 2.3%) = US$32b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$32b÷ ( 1 + 7.2%)10= US$16b
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$24b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$244, the company appears a touch undervalued at a 22% 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.
The Assumptions
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the 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 IDEX 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 7.2%, which is based on a levered beta of 1.067. 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 IDEX
- Debt is not viewed as a risk.
- Dividends are covered by earnings and cash flows.
- Dividend information for IEX.
- Earnings growth over the past year underperformed the Machinery industry.
- Dividend is low compared to the top 25% of dividend payers in the Machinery market.
- Annual earnings are forecast to grow for the next 3 years.
- Trading below our estimate of fair value by more than 20%.
- Annual earnings are forecast to grow slower than the American market.
- What else are analysts forecasting for IEX?
Moving On:
Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Can we work out why the company is trading at a discount to intrinsic value? For IDEX, we've compiled three pertinent aspects you should assess:
- Financial Health: Does IEX have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Future Earnings: How does IEX'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. 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.
關鍵見解
- 使用兩階段的股本自由現金流,IDEX公允價值估計爲311美元
- 根據目前244美元的股價,IDEX的估值估計被低估了22%
- 分析師對IEX的目標股價爲236美元,比我們對公允價值的估計低24%
IDEX公司(紐約證券交易所代碼:IEX)距離其內在價值有多遠?使用最新的財務數據,我們將通過採用預期的未來現金流並將其折現爲今天的價值,來研究股票的定價是否合理。這將使用折扣現金流 (DCF) 模型來完成。像這樣的模型可能看起來超出外行人的理解,但它們很容易理解。
我們普遍認爲,公司的價值是其未來將產生的所有現金的現值。但是,差價合約只是衆多估值指標中的一個,而且並非沒有缺陷。如果您想了解有關折扣現金流的更多信息,可以在Simply Wall St分析模型中詳細了解此計算背後的理由。
該方法
我們將使用兩階段的DCF模型,顧名思義,該模型考慮了兩個增長階段。第一階段通常是較高的增長期,在第二個 “穩步增長” 時期逐漸趨於平穩,最終值是第二個 “穩定增長” 時期。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
通常,我們假設今天的一美元比未來一美元更有價值,因此這些未來現金流的總和將折現爲今天的價值:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 6.213 億美元 | 7.240 億美元 | 775.4 億美元 | 9.312 億美元 | 11.1 億美元 | 12.3 億美元 | 13.3 億美元 | 14.2 億美元 | 14.9 億美元 | 15.6 億美元 |
增長率估算來源 | 分析師 x7 | 分析師 x6 | 分析師 x4 | 分析師 x2 | 分析師 x1 | 美國東部標準時間 @ 10.97% | 美國東部標準時間 @ 8.37% | Est @ 6.54% | Est @ 5.27% | Est @ 4.37% |
現值(美元,百萬)折扣 @ 7.2% | 580 美元 | 630 美元 | 629 美元 | 705 美元 | 781 美元 | 808 美元 | 817 美元 | 812 美元 | 797 美元 | 776 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 73 億美元
我們現在需要計算終值,該值涵蓋了這十年之後的所有未來現金流。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們使用7.2%的股本成本將未來的現金流折現爲今天的價值。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 16億美元× (1 + 2.3%) ÷ (7.2% — 2.3%) = 320億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 320億美元 ε (1 + 7.2%)10= 160 億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲240億美元。爲了得出每股內在價值,我們將其除以已發行股票總數。與目前的244美元股價相比,該公司的估值似乎略有低估,與目前股價相比折扣了22%。但請記住,這只是一個近似的估值,就像任何複雜的公式一樣,垃圾進出。
假設
上面的計算在很大程度上取決於兩個假設。第一個是貼現率,另一個是現金流。投資的一部分是自己對公司未來業績的評估,因此請自己嘗試計算並檢查自己的假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將IDEX視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了7.2%,這是基於1.067的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
IDEX 的 SWOT 分析
- 債務不被視爲風險。
- 股息由收益和現金流支付。
- IEX 的股息信息。
- 過去一年的收益增長低於機械行業。
- 與機械市場前25%的股息支付者相比,股息很低。
- 預計未來三年的年收入將增長。
- 交易價格比我們估計的公允價值低20%以上。
- 預計年收益的增長速度將低於美國市場。
- 分析師對IEX還有什麼預測?
繼續前進:
儘管公司的估值很重要,但它只是公司需要評估的衆多因素之一。DCF模型並不是投資估值的萬能藥。相反,它應該被視爲 “需要哪些假設才能低估/高估這隻股票的價值?” 的指南例如,公司權益成本或無風險利率的變化會對估值產生重大影響。我們能否弄清楚爲什麼公司的交易價格低於內在價值?對於IDEX,我們整理了您應該評估的三個相關方面:
- 財務狀況:IEX的資產負債表健康嗎?看看我們的免費資產負債表分析,其中包含對槓桿和風險等關鍵因素的六項簡單檢查。
- 未來收益:與同行和整個市場相比,IEX的增長率如何?通過與我們的免費分析師增長預期圖表互動,深入了解未來幾年的分析師共識數字。
- 其他高質量的替代品:你喜歡一個優秀的全能選手嗎?瀏覽我們的高品質股票互動清單,了解您可能還會錯過什麼!
PS。Simply Wall St應用程序每天對紐約證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
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