Stock Analysis on Net
Stock Analysis on Net

Fiserv Inc. (NASDAQ:FISV)

This company has been moved to the archive! The financial data has not been updated since April 28, 2022.

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)

Fiserv 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 9.65%
01 FCFF0 3,381
1 FCFF1 3,601 = 3,381 × (1 + 6.52%) 3,284
2 FCFF2 3,829 = 3,601 × (1 + 6.32%) 3,185
3 FCFF3 4,063 = 3,829 × (1 + 6.11%) 3,082
4 FCFF4 4,302 = 4,063 × (1 + 5.90%) 2,976
5 FCFF5 4,547 = 4,302 × (1 + 5.69%) 2,869
5 Terminal value (TV5) 121,459 = 4,547 × (1 + 5.69%) ÷ (9.65% – 5.69%) 76,628
Intrinsic value of Fiserv Inc. capital 92,023
Less: Debt (fair value) 22,596
Intrinsic value of Fiserv Inc. common stock 69,427
 
Intrinsic value of Fiserv Inc. common stock (per share) $107.41
Current share price $104.74

Based on: 10-K (reporting date: 2021-12-31).

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)

Fiserv Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 67,703 0.75 12.10%
Debt (fair value) 22,596 0.25 2.31% = 2.97% × (1 – 22.36%)

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 646,394,065 × $104.74
= $67,703,314,368.10

   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
= (21.80% + 16.70% + 18.30% + 23.10% + 31.90%) ÷ 5
= 22.36%

WACC = 9.65%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Fiserv Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Interest expense 696 716 507 193 176
Income from discontinued operations, net of income taxes — — — — 14
Net income attributable to Fiserv, Inc. 1,334 958 893 1,187 1,246
 
Effective income tax rate (EITR)1 21.80% 16.70% 18.30% 23.10% 31.90%
 
Interest expense, after tax2 544 596 414 148 120
Interest expense (after tax) and dividends 544 596 414 148 120
 
EBIT(1 – EITR)3 1,878 1,554 1,307 1,335 1,352
 
Short-term and current maturities of long-term debt 508 384 287 4 3
Long-term debt, excluding current maturities 20,729 20,300 21,612 5,955 4,897
Total Fiserv, Inc. shareholders’ equity 30,952 32,330 32,979 2,293 2,731
Total capital 52,189 53,014 54,878 8,252 7,631
Financial Ratios
Retention rate (RR)4 0.71 0.62 0.68 0.89 0.91
Return on invested capital (ROIC)5 3.60% 2.93% 2.38% 16.18% 17.72%
Averages
RR 0.76
ROIC 8.56%
 
FCFF growth rate (g)6 6.52%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

1 See details »

2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 696 × (1 – 21.80%)
= 544

3 EBIT(1 – EITR) = Net income attributable to Fiserv, Inc. – Income from discontinued operations, net of income taxes + Interest expense, after tax
= 1,334 – 0 + 544
= 1,878

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,878 – 544] ÷ 1,878
= 0.71

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,878 ÷ 52,189
= 3.60%

6 g = RR × ROIC
= 0.76 × 8.56%
= 6.52%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (90,299 × 9.65% – 3,381) ÷ (90,299 + 3,381)
= 5.69%

where:

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

FCFF growth rate (g) forecast

Fiserv Inc., H-model

Microsoft Excel
Year Value gt
1 g1 6.52%
2 g2 6.32%
3 g3 6.11%
4 g4 5.90%
5 and thereafter g5 5.69%

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)
= 6.52% + (5.69% – 6.52%) × (2 – 1) ÷ (5 – 1)
= 6.32%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 6.52% + (5.69% – 6.52%) × (3 – 1) ÷ (5 – 1)
= 6.11%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 6.52% + (5.69% – 6.52%) × (4 – 1) ÷ (5 – 1)
= 5.90%