A Look At The Intrinsic Value Of Brinker International, Inc. (NYSE:EAT)
A Look At The Intrinsic Value Of Brinker International, Inc. (NYSE:EAT)
Key Insights
- The projected fair value for Brinker International is US$42.83 based on 2 Stage Free Cash Flow to Equity
- Brinker International's US$48.00 share price indicates it is trading at similar levels as its fair value estimate
- The US$47.93 analyst price target for EAT is 12% more than our estimate of fair value
In this article we are going to estimate the intrinsic value of Brinker International, Inc. (NYSE:EAT) by estimating the company's future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!
We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.
Is Brinker International Fairly Valued?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate:
10-year free cash flow (FCF) forecast
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$160.1m | US$159.2m | US$160.8m | US$160.7m | US$161.7m | US$163.6m | US$166.0m | US$168.9m | US$172.1m | US$175.5m |
Growth Rate Estimate Source | Analyst x4 | Analyst x4 | Analyst x1 | Est @ -0.06% | Est @ 0.64% | Est @ 1.14% | Est @ 1.48% | Est @ 1.72% | Est @ 1.89% | Est @ 2.01% |
Present Value ($, Millions) Discounted @ 10% | US$146 | US$131 | US$121 | US$110 | US$100 | US$92.2 | US$85.0 | US$78.6 | US$72.8 | US$67.5 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$1.0b
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 10%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$176m× (1 + 2.3%) ÷ (10%– 2.3%) = US$2.3b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$2.3b÷ ( 1 + 10%)10= US$891m
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$1.9b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$48.0, the company appears around fair value at the time of writing. 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.
The Assumptions
We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual 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 Brinker 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 10%, which is based on a levered beta of 1.684. 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 Brinker International
- Earnings growth over the past year exceeded the industry.
- Debt is well covered by earnings and cashflows.
- Balance sheet summary for EAT.
- No major weaknesses identified for EAT.
- Annual earnings are forecast to grow for the next 3 years.
- Good value based on P/E ratio compared to estimated Fair P/E ratio.
- Total liabilities exceed total assets, which raises the risk of financial distress.
- Annual earnings are forecast to grow slower than the American market.
- Is EAT well equipped to handle threats?
Looking Ahead:
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. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Brinker International, there are three fundamental elements you should explore:
- Risks: Take risks, for example - Brinker International has 3 warning signs we think you should be aware of.
- Future Earnings: How does EAT'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
- 根據兩階段股本自由現金流,布林克國際的預計公允價值爲42.83美元
- Brinker International的48.00美元股價表明其交易價格與其公允價值估計相似
- 分析師對EAT的目標股價爲47.93美元,比我們對公允價值的估計高出12%
在本文中,我們將通過估算布林克國際公司(紐約證券交易所代碼:EAT)的未來現金流並將其折現爲現值,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。信不信由你,這並不難理解,正如你將從我們的例子中看到的那樣!
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。
布林克國際的估值是否合理?
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,我們必須估算出未來十年的現金流。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,因此我們需要對這些未來現金流的總和進行折價才能得出現值估計:
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) | 1.601 億美元 | 159.2 億美元 | 1.608 億美元 | 160.7 億美元 | 1.617 億美元 | 163.6 億美元 | 1.660 億美元 | 1.689 億美元 | 172.1 億美元 | 1.755 億美元 |
增長率估算來源 | 分析師 x4 | 分析師 x4 | 分析師 x1 | Est @ -0.06% | Est @ 0.64% | 美國東部標準時間 @ 1.14% | Est @ 1.48% | Est @ 1.72% | Est @ 1.89% | Est @ 2.01% |
現值(美元,百萬)折扣 @ 10% | 146 美元 | 131 美元 | 121 美元 | 110 美元 | 100 美元 | 92.2 美元 | 85.0 美元 | 78.6 美元 | 72.8 美元 | 67.5 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 10億美元
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10%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) = 1.76億美元× (1 + 2.3%) ÷ (10% — 2.3%) = 23億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 23億美元÷ (1 + 10%)10= 8.91 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19億美元。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48.0美元股價,該公司在撰寫本文時看似公允價值。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。
假設
我們要指出的是,貼現現金流的最重要投入是貼現率,當然還有實際的現金流。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。鑑於我們將布林克國際視爲潛在股東,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10%,這是基於1.684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。
布林克國際的SWOT分析
- 過去一年的收益增長超過了該行業。
- 收益和現金流足以彌補債務。
- EAT 的資產負債表摘要。
- 沒有發現 EAT 的主要弱點。
- 預計未來三年的年收入將增長。
- 與估計的公允市盈率相比,基於市盈率,物有所值。
- 總負債超過總資產,這增加了財務困境的風險。
- 預計年收益的增長速度將低於美國市場。
- EAT 有足夠的能力應對威脅嗎?
展望未來:
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,DCF模型的最佳用途是測試某些假設和理論,看看它們是否會導致公司被低估或高估。如果一家公司以不同的速度增長,或者其股本成本或無風險利率急劇變化,則產出可能會大不相同。對於布林克國際而言,您應該探索三個基本要素:
- 風險:例如,冒險——布林克國際有3個警告信號,我們認爲您應該注意。
- 未來收益:與同行和整個市場相比,EAT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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