Calculating The Intrinsic Value Of ESCO Technologies Inc. (NYSE:ESE)
Calculating The Intrinsic Value Of ESCO Technologies Inc. (NYSE:ESE)
Key Insights
- Using the 2 Stage Free Cash Flow to Equity, ESCO Technologies fair value estimate is US$96.49
- Current share price of US$105 suggests ESCO Technologies is potentially trading close to its fair value
- Our fair value estimate is 20% lower than ESCO Technologies' analyst price target of US$121
Today we'll do a simple run through of a valuation method used to estimate the attractiveness of ESCO Technologies Inc. (NYSE:ESE) as an investment opportunity by taking the expected future cash flows and discounting them to their present value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. It may sound complicated, but actually it is quite simple!
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.
What's The Estimated Valuation?
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value:
10-year free cash flow (FCF) forecast
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | US$100.7m | US$111.3m | US$119.2m | US$125.9m | US$131.8m | US$137.0m | US$141.7m | US$146.1m | US$150.2m | US$154.3m |
Growth Rate Estimate Source | Analyst x2 | Analyst x2 | Est @ 7.11% | Est @ 5.66% | Est @ 4.65% | Est @ 3.94% | Est @ 3.45% | Est @ 3.10% | Est @ 2.86% | Est @ 2.69% |
Present Value ($, Millions) Discounted @ 7.2% | US$93.9 | US$96.8 | US$96.7 | US$95.3 | US$93.0 | US$90.2 | US$87.0 | US$83.6 | US$80.2 | US$76.9 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$894m
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. 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 7.2%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$154m× (1 + 2.3%) ÷ (7.2%– 2.3%) = US$3.2b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$3.2b÷ ( 1 + 7.2%)10= US$1.6b
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$2.5b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$105, the company appears around fair value at the time of writing. 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. 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 ESCO Technologies 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 1.071. 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 ESCO Technologies
- Earnings growth over the past year exceeded its 5-year average.
- Debt is not viewed as a risk.
- Balance sheet summary for ESE.
- 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.
- Expensive based on P/E ratio and estimated fair value.
- Annual earnings are forecast to grow faster than the American market.
- Annual revenue is forecast to grow slower than the American market.
- What else are analysts forecasting for ESE?
Moving On:
Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. 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 ESCO Technologies, we've compiled three relevant elements you should assess:
- Financial Health: Does ESE 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.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for ESE's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
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,ESCO Technologies的公允價值估計爲96.49美元
- 目前的105美元股價表明ESCO Technologies的交易價格可能接近其公允價值
- 我們的公允價值估計比ESCO Technologies的分析師目標股價121美元低20%
今天,我們將簡單介紹一種估值方法,該方法用於估算ESCO Technologies Inc.(紐約證券交易所代碼:ESE)作爲投資機會的吸引力,方法是計算預期的未來現金流並將其折現爲現值。爲此,我們將利用折扣現金流 (DCF) 模型。聽起來可能很複雜,但實際上很簡單!
但請記住,估算公司價值的方法有很多,而差價合約只是一種方法。對於那些熱衷於股票分析的人來說,你可能會對這裏的Simply Wall St分析模型感興趣。
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。
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) 預測
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | 130.7 億美元 | 1.113 億美元 | 119.2 億美元 | 125.9 億美元 | 1.318 億美元 | 137.0 億美元 | 141.7 億美元 | 146.1 億美元 | 1.502 億美元 | 1.543 億美元 |
增長率估算來源 | 分析師 x2 | 分析師 x2 | 東部時間 @ 7.11% | Est @ 5.66% | 美國東部時間 @ 4.65% | Est @ 3.94% | Est @ 3.45% | 東部時間 @ 3.10% | Est @ 2.86% | Est @ 2.69% |
現值(美元,百萬)折扣 @ 7.2% | 93.9 美元 | 96.8 美元 | 96.7 美元 | 95.3 美元 | 93.0 美元 | 90.2 美元 | 87.0 美元 | 83.6 美元 | 80.2 美元 | 76.9 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
10 年期現金流 (PVCF) 的現值 = 8.94 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。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7.2%。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 1.54 億美元× (1 + 2.3%) ÷ (7.2% — 2.3%) = 32億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 32億美元÷ (1 + 7.2%)10= 16億美元
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25億美元。最後一步是將股票價值除以已發行股票的數量。與目前的105美元股價相比,該公司在撰寫本文時的價格接近公允價值。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。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ESCO Technologies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1.071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。
ESCO 技術的 SWOT 分析
- 過去一年的收益增長超過了其5年平均水平。
- 債務不被視爲風險。
- ESE 的資產負債表摘要。
- 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。
- 根據市盈率和估計的公允價值,價格昂貴。
- 預計年收入的增長速度將快於美國市場。
- 預計年收入的增長速度將低於美國市場。
- 分析師對ESE還有什麼預測?
繼續前進:
雖然重要,但DCF的計算只是公司需要評估的衆多因素之一。使用DCF模型不可能獲得萬無一失的估值。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ESCO Technologies,我們整理了您應該評估的三個相關要素:
- 財務狀況:ESE的資產負債表是否良好?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。
- 管理層:內部人士是否一直在增加股價以利用市場對ESE未來前景的情緒?查看我們的管理層和董事會分析,了解首席執行官薪酬和治理因素。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
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。
風險及免責聲明
- 分享到weixin
- 分享到qq
- 分享到facebook
- 分享到twitter
- 分享到微博
- 粘贴板
使用瀏覽器的分享功能,分享給你的好友吧