Stock Analysis on Net
Stock Analysis on Net

United Airlines Holdings Inc. (NASDAQ:UAL)

This company has been moved to the archive! The financial data has not been updated since April 20, 2023.

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)

United Airlines Holdings 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 8.76%
01 FCFF0 2,684
1 FCFF1 2,714 = 2,684 × (1 + 1.13%) 2,496
2 FCFF2 2,755 = 2,714 × (1 + 1.48%) 2,329
3 FCFF3 2,805 = 2,755 × (1 + 1.84%) 2,181
4 FCFF4 2,867 = 2,805 × (1 + 2.19%) 2,049
5 FCFF5 2,940 = 2,867 × (1 + 2.55%) 1,932
5 Terminal value (TV5) 48,535 = 2,940 × (1 + 2.55%) ÷ (8.76% – 2.55%) 31,895
Intrinsic value of United Airlines Holdings Inc. capital 42,881
Less: Long-term debt and finance leases (fair value) 29,590
Intrinsic value of United Airlines Holdings Inc. common stock 13,291
 
Intrinsic value of United Airlines Holdings Inc. common stock (per share) $40.52
Current share price $44.89

Based on: 10-K (reporting date: 2022-12-31).

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)

United Airlines Holdings Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 14,723 0.33 16.67%
Long-term debt and finance leases (fair value) 29,590 0.67 4.82% = 6.21% × (1 – 22.33%)

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 327,968,872 × $44.89
= $14,722,522,664.08

   Long-term debt and finance leases (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
= (25.56% + 23.19% + 19.87% + 23.12% + 19.90%) ÷ 5
= 22.33%

WACC = 8.76%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

United Airlines Holdings Inc., PRAT model

Microsoft Excel
Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in millions)
Interest expense, net of interest capitalized 1,673 1,577 992 646 659
Net income (loss) 737 (1,964) (7,069) 3,009 2,129
 
Effective income tax rate (EITR)1 25.56% 23.19% 19.87% 23.12% 19.90%
 
Interest expense, net of interest capitalized, after tax2 1,245 1,211 795 497 528
Interest expense (after tax) and dividends 1,245 1,211 795 497 528
 
EBIT(1 – EITR)3 1,982 (753) (6,274) 3,506 2,657
 
Current maturities of long-term debt 2,911 3,002 1,911 1,407 1,230
Current maturities of finance leases 104 76 182 46 149
Long-term debt, less current portion 28,283 30,361 24,836 13,145 12,215
Long-term obligations under finance leases 115 219 224 220 1,134
Stockholders’ equity 6,896 5,029 5,960 11,531 9,995
Total capital 38,309 38,687 33,113 26,349 24,723
Financial Ratios
Retention rate (RR)4 0.37 — — 0.86 0.80
Return on invested capital (ROIC)5 5.17% -1.95% -18.95% 13.30% 10.75%
Averages
RR 0.68
ROIC 1.67%
 
FCFF growth rate (g)6 1.13%

Based on: 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), 10-K (reporting date: 2018-12-31).

1 See details »

2022 Calculations

2 Interest expense, net of interest capitalized, after tax = Interest expense, net of interest capitalized × (1 – EITR)
= 1,673 × (1 – 25.56%)
= 1,245

3 EBIT(1 – EITR) = Net income (loss) + Interest expense, net of interest capitalized, after tax
= 737 + 1,245
= 1,982

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,982 – 1,245] ÷ 1,982
= 0.37

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,982 ÷ 38,309
= 5.17%

6 g = RR × ROIC
= 0.68 × 1.67%
= 1.13%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (44,313 × 8.76% – 2,684) ÷ (44,313 + 2,684)
= 2.55%

where:

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

FCFF growth rate (g) forecast

United Airlines Holdings Inc., H-model

Microsoft Excel
Year Value gt
1 g1 1.13%
2 g2 1.48%
3 g3 1.84%
4 g4 2.19%
5 and thereafter g5 2.55%

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)
= 1.13% + (2.55% – 1.13%) × (2 – 1) ÷ (5 – 1)
= 1.48%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.13% + (2.55% – 1.13%) × (3 – 1) ÷ (5 – 1)
= 1.84%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.13% + (2.55% – 1.13%) × (4 – 1) ÷ (5 – 1)
= 2.19%