Stock Analysis on Net
Stock Analysis on Net

Toyota Motor Corp. (NYSE:TM)

This company has been moved to the archive! The financial data has not been updated since June 24, 2015.

Present Value of Free Cash Flow to Equity (FCFE)

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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 equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Toyota Motor Corp., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 10.47%
01 FCFE0 20,434
1 FCFE1 21,325 = 20,434 × (1 + 4.36%) 19,305
2 FCFE2 22,066 = 21,325 × (1 + 3.47%) 18,082
3 FCFE3 22,636 = 22,066 × (1 + 2.58%) 16,791
4 FCFE4 23,019 = 22,636 × (1 + 1.69%) 15,457
5 FCFE5 23,203 = 23,019 × (1 + 0.80%) 14,104
5 Terminal value (TV5) 241,910 = 23,203 × (1 + 0.80%) ÷ (10.47% – 0.80%) 147,051
Intrinsic value of Toyota Motor Corp. common stock 230,790
 
Intrinsic value of Toyota Motor Corp. common stock (per share) $146.68
Current share price $135.40

Based on: 20-F (reporting date: 2015-03-31).

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.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.83%
Expected rate of return on market portfolio2 E(RM) 13.48%
Systematic risk of Toyota Motor Corp. common stock βTM 0.65
 
Required rate of return on Toyota Motor Corp. common stock3 rTM 10.47%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rTM = RF + βTM [E(RM) – RF]
= 4.83% + 0.65 [13.48% – 4.83%]
= 10.47%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Toyota Motor Corp., PRAT model

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Average Mar 31, 2015 Mar 31, 2014 Mar 31, 2013 Mar 31, 2012 Mar 31, 2011 Mar 31, 2010
Selected Financial Data (US$ in millions, translated from JPY ￥)
Dividends paid to Toyota Motor Corporation shareholders 4,626 3,846 2,018 1,908 1,697 1,854
Net income attributable to Toyota Motor Corporation 18,117 17,704 10,218 3,450 4,909 2,251
Net revenues 227,030 249,484 234,327 226,106 228,427 203,686
Total assets 397,881 402,384 376,841 372,928 358,607 326,196
Total Toyota Motor Corporation shareholders’ equity 139,948 140,504 129,015 128,364 124,262 111,347
Financial Ratios
Retention rate1 0.74 0.78 0.80 0.45 0.65 0.18
Profit margin2 7.98% 7.10% 4.36% 1.53% 2.15% 1.11%
Asset turnover3 0.57 0.62 0.62 0.61 0.64 0.62
Financial leverage4 2.84 2.86 2.92 2.91 2.89 2.93
Averages
Retention rate 0.60
Profit margin 4.04%
Asset turnover 0.62
Financial leverage 2.89
 
FCFE growth rate (g)5 4.36%

Based on: 20-F (reporting date: 2015-03-31), 20-F (reporting date: 2014-03-31), 20-F (reporting date: 2013-03-31), 20-F (reporting date: 2012-03-31), 20-F (reporting date: 2011-03-31), 20-F (reporting date: 2010-03-31).

2015 Calculations

1 Retention rate = (Net income attributable to Toyota Motor Corporation – Dividends paid to Toyota Motor Corporation shareholders) ÷ Net income attributable to Toyota Motor Corporation
= (18,117 – 4,626) ÷ 18,117
= 0.74

2 Profit margin = 100 × Net income attributable to Toyota Motor Corporation ÷ Net revenues
= 100 × 18,117 ÷ 227,030
= 7.98%

3 Asset turnover = Net revenues ÷ Total assets
= 227,030 ÷ 397,881
= 0.57

4 Financial leverage = Total assets ÷ Total Toyota Motor Corporation shareholders’ equity
= 397,881 ÷ 139,948
= 2.84

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.60 × 4.04% × 0.62 × 2.89
= 4.36%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (213,039 × 10.47% – 20,434) ÷ (213,039 + 20,434)
= 0.80%

where:
Equity market value0 = current market value of Toyota Motor Corp. common stock (US$ in millions)
FCFE0 = the last year Toyota Motor Corp. free cash flow to equity (US$ in millions)
r = required rate of return on Toyota Motor Corp. common stock

FCFE growth rate (g) forecast

Toyota Motor Corp., H-model

Microsoft Excel
Year Value gt
1 g1 4.36%
2 g2 3.47%
3 g3 2.58%
4 g4 1.69%
5 and thereafter g5 0.80%

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)
= 4.36% + (0.80% – 4.36%) × (2 – 1) ÷ (5 – 1)
= 3.47%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.36% + (0.80% – 4.36%) × (3 – 1) ÷ (5 – 1)
= 2.58%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.36% + (0.80% – 4.36%) × (4 – 1) ÷ (5 – 1)
= 1.69%