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 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)

Toyota Motor Corp., 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 10.27%
01 FCFF0 11,971
1 FCFF1 12,205 = 11,971 × (1 + 1.96%) 11,068
2 FCFF2 12,593 = 12,205 × (1 + 3.18%) 10,356
3 FCFF3 13,147 = 12,593 × (1 + 4.40%) 9,805
4 FCFF4 13,886 = 13,147 × (1 + 5.62%) 9,392
5 FCFF5 14,837 = 13,886 × (1 + 6.84%) 9,100
5 Terminal value (TV5) 462,683 = 14,837 × (1 + 6.84%) ÷ (10.27% – 6.84%) 283,777
Intrinsic value of Toyota Motor Corp. capital 333,498
Less: Debt (fair value) 160,267
Intrinsic value of Toyota Motor Corp. common stock 173,231
 
Intrinsic value of Toyota Motor Corp. common stock (per share) $110.10
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.

Weighted Average Cost of Capital (WACC)

Toyota Motor Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 213,039 0.57 10.51%
Debt (fair value) 160,267 0.43 9.96% = 14.89% × (1 – 33.13%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,573,406,816 × $135.40
= $213,039,282,886.40

   Debt (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
= (27.91% + 27.82% + 33.74% + 41.59% + 40.19% + 27.51%) ÷ 6
= 33.13%

WACC = 10.27%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Toyota Motor Corp., PRAT model

Microsoft Excel
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 ￥)
Interest expense 191 191 244 279 353 359
Net income attributable to Toyota Motor Corporation 18,117 17,704 10,218 3,450 4,909 2,251
Add: Net income attributable to noncontrolling interest 1,122 1,637 1,288 1,031 689 374
Add: Income tax expense 7,448 7,456 5,859 3,191 3,762 996
Earnings before tax (EBT) 26,687 26,796 17,366 7,672 9,360 3,621
 
Effective income tax rate (EITR)1 27.91% 27.82% 33.74% 41.59% 40.19% 27.51%
 
Interest expense, after tax2 137 138 162 163 211 260
Add: Dividends paid to Toyota Motor Corporation shareholders 4,626 3,846 2,018 1,908 1,697 1,854
Interest expense (after tax) and dividends 4,763 3,983 2,180 2,070 1,908 2,114
 
EBIT(1 – EITR)3 18,255 17,841 10,380 3,613 5,120 2,512
 
Short-term borrowings 42,082 46,910 43,432 41,984 38,232 35,250
Current portion of long-term debt 32,638 28,643 28,722 30,571 33,347 23,843
Long-term debt, excluding current portion 83,481 82,996 77,929 73,516 77,561 75,402
Total Toyota Motor Corporation shareholders’ equity 139,948 140,504 129,015 128,364 124,262 111,347
Total capital 298,150 299,054 279,097 274,435 273,403 245,842
Financial Ratios
Retention rate (RR)4 0.74 0.78 0.79 0.43 0.63 0.16
Return on invested capital (ROIC)5 6.12% 5.97% 3.72% 1.32% 1.87% 1.02%
Averages
RR 0.59
ROIC 3.34%
 
FCFF growth rate (g)6 1.96%

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 EITR = 100 × Income tax expense ÷ EBT
= 100 × 7,448 ÷ 26,687
= 27.91%

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 191 × (1 – 27.91%)
= 137

3 EBIT(1 – EITR) = Net income attributable to Toyota Motor Corporation + Interest expense, after tax
= 18,117 + 137
= 18,255

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [18,255 – 4,763] ÷ 18,255
= 0.74

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 18,255 ÷ 298,150
= 6.12%

6 g = RR × ROIC
= 0.59 × 3.34%
= 1.96%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (373,307 × 10.27% – 11,971) ÷ (373,307 + 11,971)
= 6.84%

where:

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

FCFF growth rate (g) forecast

Toyota Motor Corp., H-model

Microsoft Excel
Year Value gt
1 g1 1.96%
2 g2 3.18%
3 g3 4.40%
4 g4 5.62%
5 and thereafter g5 6.84%

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)
= 1.96% + (6.84% – 1.96%) × (2 – 1) ÷ (5 – 1)
= 3.18%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.96% + (6.84% – 1.96%) × (3 – 1) ÷ (5 – 1)
= 4.40%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.96% + (6.84% – 1.96%) × (4 – 1) ÷ (5 – 1)
= 5.62%