Express Scripts, Inc. (ESRX)

Discount cash flow analysis

Buy Undervalued by 21.3%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Express Scripts, Inc., 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
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

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% $87.11 $85.37 $83.69
Terminal Growth% 0 $87.93 $86.16 $84.45
  +1% $88.77 $86.96 $85.22

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 $2.18 (overvalued by 96.93%) - over 4 years ago
  • SethWellbourne created a new valuation of $40.09 (overvalued by 10.97%) - 12 years ago
  • GordonGekko created a new valuation of $58.28 (undervalued by 20.74%) - 12 years ago
  • dweis created a new valuation of $49.86 (overvalued by 12.65%) - over 12 years ago
  • GordonGekko created a new valuation of $72.13 (undervalued by 3.4%) - 13 years ago
  • LordTrask created a new valuation of $86.16 (undervalued by 23.51%) - 13 years ago

Comments

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The boring details

All amounts in millions Figures
Enterprise Value: 19,424
Net Debt (Long-term borrowings less cash): 1,585
Equity Value: 17,519
Number of Shares Outstanding: 251,000,000
Calculated value per share: $86.16

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.