Smiths Group plc (SMIN)

Discount cash flow analysis

Sell Overvalued by 38.4%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Smiths Group plc, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in £ millions
2008 2009 2010 2011 2012 2013 2014 2015
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% £8.67 £8.55 £8.43
Terminal Growth% 0 £8.69 £8.57 £8.45
  +1% £8.71 £8.59 £8.46

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of £10.78 (overvalued by 22.45%) - over 4 years ago
  • B120WNY created a new valuation of £8.02 (undervalued by 17.77%) - over 11 years ago
  • GordonGekko created a new valuation of £8.57 (undervalued by 4.51%) - 12 years ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 6,194
Net Debt (Long-term borrowings less cash): 786
Equity Value: 3,187
Number of Shares Outstanding: 389,000,000
Calculated value per share: £8.57

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.