Stock Analysis on Net
Stock Analysis on Net

Charter Communications Inc. (NASDAQ:CHTR)

This company has been moved to the archive! The financial data has not been updated since February 2, 2024.

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Charter Communications Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 7.54%
01 FCFF0 7,171
1 FCFF1 7,419 = 7,171 × (1 + 3.46%) 6,899
2 FCFF2 7,650 = 7,419 × (1 + 3.11%) 6,615
3 FCFF3 7,862 = 7,650 × (1 + 2.77%) 6,321
4 FCFF4 8,052 = 7,862 × (1 + 2.42%) 6,021
5 FCFF5 8,220 = 8,052 × (1 + 2.08%) 5,715
5 Terminal value (TV5) 153,691 = 8,220 × (1 + 2.08%) ÷ (7.54% – 2.08%) 106,854
Intrinsic value of Charter Communications Inc. capital 138,424
Less: Long-term debt, including current portion (fair value) 87,729
Intrinsic value of Charter Communications Inc. common stock 50,695
 
Intrinsic value of Charter Communications Inc. common stock (per share) $349.08
Current share price $319.21

Based on: 10-K (reporting date: 2023-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Charter Communications Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 46,357 0.35 13.67%
Long-term debt, including current portion (fair value) 87,729 0.65 4.30% = 5.30% × (1 – 18.84%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 145,225,459 × $319.21
= $46,357,418,767.39

   Long-term debt, including current portion (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (23.24% + 21.62% + 16.72% + 14.55% + 18.06%) ÷ 5
= 18.84%

WACC = 7.54%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Charter Communications Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense, net 5,188 4,556 4,037 3,848 3,797
Net income attributable to Charter shareholders 4,557 5,055 4,654 3,222 1,668
 
Effective income tax rate (EITR)1 23.24% 21.62% 16.72% 14.55% 18.06%
 
Interest expense, net, after tax2 3,982 3,571 3,362 3,288 3,111
Interest expense (after tax) and dividends 3,982 3,571 3,362 3,288 3,111
 
EBIT(1 – EITR)3 8,539 8,626 8,016 6,510 4,779
 
Current portion of long-term debt 2,000 1,510 2,997 1,008 3,500
Long-term debt, less current portion 95,777 96,093 88,564 81,744 75,578
Total Charter shareholders’ equity 11,086 9,119 14,050 23,805 31,445
Total capital 108,863 106,722 105,611 106,557 110,523
Financial Ratios
Retention rate (RR)4 0.53 0.59 0.58 0.49 0.35
Return on invested capital (ROIC)5 7.84% 8.08% 7.59% 6.11% 4.32%
Averages
RR 0.51
ROIC 6.79%
 
FCFF growth rate (g)6 3.46%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, net, after tax = Interest expense, net × (1 – EITR)
= 5,188 × (1 – 23.24%)
= 3,982

3 EBIT(1 – EITR) = Net income attributable to Charter shareholders + Interest expense, net, after tax
= 4,557 + 3,982
= 8,539

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [8,539 – 3,982] ÷ 8,539
= 0.53

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 8,539 ÷ 108,863
= 7.84%

6 g = RR × ROIC
= 0.51 × 6.79%
= 3.46%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (134,086 × 7.54% – 7,171) ÷ (134,086 + 7,171)
= 2.08%

where:

Total capital, fair value0 = current fair value of Charter Communications Inc. debt and equity (US$ in millions)
FCFF0 = the last year Charter Communications Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Charter Communications Inc. capital

FCFF growth rate (g) forecast

Charter Communications Inc., H-model

Microsoft Excel
Year Value gt
1 g1 3.46%
2 g2 3.11%
3 g3 2.77%
4 g4 2.42%
5 and thereafter g5 2.08%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 3.46% + (2.08% – 3.46%) × (2 – 1) ÷ (5 – 1)
= 3.11%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 3.46% + (2.08% – 3.46%) × (3 – 1) ÷ (5 – 1)
= 2.77%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 3.46% + (2.08% – 3.46%) × (4 – 1) ÷ (5 – 1)
= 2.42%