Charles River Laboratories International, Inc. (NYSE:CRL) Shares Could Be 24% Below Their Intrinsic Value Estimate
Charles River Laboratories International, Inc. (NYSE:CRL) Shares Could Be 24% Below Their Intrinsic Value Estimate
Key Insights
- Charles River Laboratories International's estimated fair value is US$328 based on 2 Stage Free Cash Flow to Equity
- Charles River Laboratories International's US$247 share price signals that it might be 24% undervalued
- The US$271 analyst price target for CRL is 17% less than our estimate of fair value
Today we will run through one way of estimating the intrinsic value of Charles River Laboratories International, Inc. (NYSE:CRL) by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!
Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
Step By Step Through The Calculation
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) forecast
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$455.3m | US$570.8m | US$647.8m | US$712.1m | US$801.9m | US$868.4m | US$924.9m | US$973.3m | US$1.02b | US$1.05b |
Growth Rate Estimate Source | Analyst x5 | Analyst x6 | Analyst x5 | Analyst x2 | Analyst x2 | Est @ 8.30% | Est @ 6.50% | Est @ 5.24% | Est @ 4.35% | Est @ 3.73% |
Present Value ($, Millions) Discounted @ 7.0% | US$425 | US$498 | US$528 | US$542 | US$570 | US$577 | US$574 | US$564 | US$550 | US$533 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$5.4b
The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.3%. We discount the terminal cash flows to today's value at a cost of equity of 7.0%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$1.1b× (1 + 2.3%) ÷ (7.0%– 2.3%) = US$23b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$23b÷ ( 1 + 7.0%)10= US$11b
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$17b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$247, the company appears a touch undervalued at a 24% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
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 Charles River Laboratories International 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 7.0%, which is based on a levered beta of 1.034. 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 Charles River Laboratories International
- Debt is well covered by earnings and cashflows.
- Balance sheet summary for CRL.
- Earnings declined over the past year.
- 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 CRL?
Looking Ahead:
Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Charles River Laboratories International, we've put together three additional factors you should further examine:
- Risks: Every company has them, and we've spotted 2 warning signs for Charles River Laboratories International you should know about.
- Future Earnings: How does CRL'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. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock 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
- 根據兩階段的股本自由現金流,查爾斯河實驗室國際的估計公允價值爲328美元
- 查爾斯河實驗室國際公司的247美元股價表明其估值可能被低估了24%
- 分析師對CRL的271美元目標股價比我們對公允價值的估計低17%
今天,我們將介紹一種估算查爾斯河實驗室國際公司(紐約證券交易所代碼:CRL)內在價值的方法,即採用預期的未來現金流並將其折現爲現值。實現這一目標的一種方法是使用折扣現金流(DCF)模型。聽起來可能很複雜,但實際上很簡單!
公司可以在很多方面得到估值,因此我們要指出,DCF並不適合所有情況。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。
逐步進行計算
我們使用的是兩階段增長模型,這只是意味着我們考慮了公司增長的兩個階段。在初始階段,公司的增長率可能更高,而第二階段通常被認爲具有穩定的增長率。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,因此我們將這些未來現金流的價值折現爲以今天的美元計算的估計價值:
10 年自由現金流 (FCF) 預測
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 4.553 億美元 | 5.708 億美元 | 647.8 億美元 | 712.1 億美元 | 801.9 億美元 | 868.4 億美元 | 924.9 億美元 | 973.3 億美元 | 10.2 億美元 | 10.5 億美元 |
增長率估算來源 | 分析師 x5 | 分析師 x6 | 分析師 x5 | 分析師 x2 | 分析師 x2 | 美國東部標準時間 @ 8.30% | 東部標準時間 @ 6.50% | 東部時間 @ 5.24% | 美國東部時間 @ 4.35% | Est @ 3.73% |
現值(美元,百萬)折扣 @ 7.0% | 425 美元 | 498 美元 | 528 美元 | 542 美元 | 570 美元 | 577 美元 | 574 美元 | 564 美元 | 550 美元 | 533 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 54 億美元
第二階段也稱爲終值,這是企業在第一階段之後的現金流。戈登增長公式用於計算終值,其未來年增長率等於10年期國債收益率2.3%的5年平均水平。我們將終端現金流折現爲今天的價值,權益成本爲7.0%。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 11億美元× (1 + 2.3%) ÷ (7.0% — 2.3%) = 230億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 230億美元÷ (1 + 7.0%)10= 110 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170億美元。最後一步是將股票價值除以已發行股票的數量。相對於目前的247美元股價,該公司的估值似乎略有低估,與目前股價相比折扣了24%。但是,估值是不精確的工具,就像望遠鏡一樣——移動幾度,最終進入另一個星系。請記住這一點。
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。鑑於我們將查爾斯里弗國際實驗室視爲潛在股東,因此使用股本成本作爲貼現率,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7.0%,這是基於1.034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。
查爾斯河國際實驗室的 SWOT 分析
- 收益和現金流足以彌補債務。
- CRL 的資產負債表摘要。
- 在過去的一年中,收益有所下降。
- 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CRL還有什麼預測?
展望未來:
雖然重要,但理想情況下,DCF的計算不會是您爲公司仔細檢查的唯一分析內容。DCF模型不是完美的股票估值工具。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,如果稍微調整終值增長率,則可能會極大地改變整體結果。爲什麼內在價值高於當前股價?對於查爾斯河國際實驗室,我們彙總了您應該進一步研究的另外三個因素:
- 風險:每家公司都有風險,我們發現了兩個你應該知道的國際查爾斯河實驗室的警告標誌。
- 未來收益:與同行和整個市場相比,CRL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每天都會更新每隻美國股票的差價合約計算結果,因此,如果您想找到任何其他股票的內在價值,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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