Calculating The Fair Value Of Modine Manufacturing Company (NYSE:MOD)
Calculating The Fair Value Of Modine Manufacturing Company (NYSE:MOD)
Key Insights
- Using the 2 Stage Free Cash Flow to Equity, Modine Manufacturing fair value estimate is US$101
- Current share price of US$93.78 suggests Modine Manufacturing is potentially trading close to its fair value
- Our fair value estimate is 7.7% higher than Modine Manufacturing's analyst price target of US$93.95
In this article we are going to estimate the intrinsic value of Modine Manufacturing Company (NYSE:MOD) by taking the forecast future cash flows of the company and discounting them back to today's value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
What's The Estimated Valuation?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$161.7m | US$149.7m | US$244.3m | US$279.1m | US$308.9m | US$334.1m | US$355.5m | US$373.8m | US$389.9m | US$404.3m |
Growth Rate Estimate Source | Analyst x5 | Analyst x6 | Analyst x4 | Est @ 14.27% | Est @ 10.67% | Est @ 8.16% | Est @ 6.40% | Est @ 5.17% | Est @ 4.30% | Est @ 3.70% |
Present Value ($, Millions) Discounted @ 8.0% | US$150 | US$128 | US$194 | US$205 | US$211 | US$211 | US$208 | US$203 | US$196 | US$188 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$1.9b
After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. 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 8.0%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$404m× (1 + 2.3%) ÷ (8.0%– 2.3%) = US$7.3b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$7.3b÷ ( 1 + 8.0%)10= US$3.4b
The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is US$5.3b. 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$93.8, the company appears about fair value at a 7.3% 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
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the 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 Modine Manufacturing 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 8.0%, which is based on a levered beta of 1.233. 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 Modine Manufacturing
- Earnings growth over the past year exceeded the industry.
- Debt is not viewed as a risk.
- Balance sheet summary for MOD.
- No major weaknesses identified for MOD.
- Annual earnings are forecast to grow for the next 3 years.
- Current share price is below our estimate of fair value.
- Annual earnings are forecast to grow slower than the American market.
- What else are analysts forecasting for MOD?
Next Steps:
Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Modine Manufacturing, there are three fundamental factors you should explore:
- Risks: We feel that you should assess the 1 warning sign for Modine Manufacturing we've flagged before making an investment in the company.
- Future Earnings: How does MOD'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,摩丁製造的公允價值估計爲101美元
- 目前的股價爲93.78美元,表明摩丁製造的交易價格可能接近其公允價值
- 我們的公允價值估計比摩丁製造分析師設定的93.95美元的目標股價高出7.7%
在本文中,我們將通過預測摩丁製造公司(紐約證券交易所代碼:MOD)的未來現金流並將其折扣回今天的價值來估算該公司的內在價值。實現這一目標的一種方法是使用折扣現金流(DCF)模型。在你認爲自己無法理解之前,請繼續閱讀!實際上,它沒有你想象的那麼複雜。
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。任何有興趣進一步了解內在價值的人都應該讀一讀 Simply Wall St 分析模型。
估計估值是多少?
我們使用所謂的兩階段模型,這僅意味着公司的現金流有兩個不同的增長期。通常,第一階段是較高的增長階段,第二階段是較低的增長階段。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。
差價合約就是關於未來一美元的價值低於今天一美元的概念,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) | 1.617 億美元 | 149.7 億美元 | 2.443 億美元 | 279.1 億美元 | 308.9 億美元 | 3.341 億美元 | 3.555 億美元 | 3.738 億美元 | 389.9 億美元 | 4.043 億美元 |
增長率估算來源 | 分析師 x5 | 分析師 x6 | 分析師 x4 | 美國東部標準時間 @ 14.27% | Est @ 10.67% | 美國東部標準時間 @ 8.16% | Est @ 6.40% | Est @ 5.17% | 東部標準時間 @ 4.30% | Est @ 3.70% |
現值(美元,百萬)折扣 @ 8.0% | 150 美元 | 128 美元 | 194 美元 | 205 美元 | 211 美元 | 211 美元 | 208 美元 | 203 美元 | 196 美元 | 188 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 19億美元
在計算了最初10年期內未來現金流的現值之後,我們需要計算終值,該終值涵蓋了第一階段以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8.0%的權益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) = 4.04 億美元× (1 + 2.3%) ÷ (8.0% — 2.3%) = 73億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 73億美元÷ (1 + 8.0%)10= 34 億美元
總價值是未來十年的現金流總額加上貼現的終端價值,由此得出總權益價值,在本例中爲53億美元。爲了得出每股內在價值,我們將其除以已發行股票總數。相對於目前的93.8美元的股價,該公司的公允價值似乎比目前的股價折扣了7.3%。任何計算中的假設都會對估值產生重大影響,因此最好將其視爲粗略的估計,而不是精確到最後一美分。
重要假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。如果你不同意這些結果,那就自己計算一下,試一試假設。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。鑑於我們將摩丁製造視爲潛在股東,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8.0%,這是基於1.233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。
摩丁製造業的 SWOT 分析
- 過去一年的收益增長超過了該行業。
- 債務不被視爲風險。
- 國防部的資產負債表摘要。
- 國防部沒有發現重大弱點。
- 預計未來三年的年收入將增長。
- 目前的股價低於我們對公允價值的估計。
- 預計年收益的增長速度將低於美國市場。
- 分析師對國防部還有什麼預測?
後續步驟:
儘管公司的估值很重要,但它不應該是你在研究公司時唯一考慮的指標。DCF模型不是完美的股票估值工具。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。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。對於摩丁製造而言,您應該探索三個基本因素:
- 風險:我們認爲,在投資摩丁製造公司之前,您應該評估我們標記的摩丁製造業的1個警告信號。
- 未來收益:國防部的增長率與同行和整個市場相比如何?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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