Stock Analysis on Net
Stock Analysis on Net

Becton, Dickinson & Co. (NYSE:BDX)

This company has been moved to the archive! The financial data has not been updated since May 5, 2022.

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)

Becton, Dickinson & Co., 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 11.21%
01 FCFE0 3,173
1 FCFE1 3,221 = 3,173 × (1 + 1.53%) 2,897
2 FCFE2 3,312 = 3,221 × (1 + 2.81%) 2,678
3 FCFE3 3,447 = 3,312 × (1 + 4.08%) 2,506
4 FCFE4 3,632 = 3,447 × (1 + 5.36%) 2,374
5 FCFE5 3,873 = 3,632 × (1 + 6.64%) 2,277
5 Terminal value (TV5) 90,342 = 3,873 × (1 + 6.64%) ÷ (11.21% – 6.64%) 53,110
Intrinsic value of Becton, Dickinson & Co. common stock 65,842
 
Intrinsic value of Becton, Dickinson & Co. common stock (per share) $230.97
Current share price $259.64

Based on: 10-K (reporting date: 2021-09-30).

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 4.86%
Expected rate of return on market portfolio2 E(RM) 13.52%
Systematic risk of Becton, Dickinson & Co. common stock βBDX 0.73
 
Required rate of return on Becton, Dickinson & Co. common stock3 rBDX 11.21%

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 rBDX = RF + βBDX [E(RM) – RF]
= 4.86% + 0.73 [13.52% – 4.86%]
= 11.21%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Becton, Dickinson & Co., PRAT model

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Average Sep 30, 2021 Sep 30, 2020 Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016
Selected Financial Data (US$ in millions)
Cash dividends, common 958 888 832 775 645 562
Cash dividends, preferred 90 107 152 152 70 —
Net income 2,092 874 1,233 311 1,100 976
Revenues 20,248 17,117 17,290 15,983 12,093 12,483
Total assets 53,866 54,012 51,765 53,904 37,734 25,586
Shareholders’ equity 23,677 23,765 21,081 20,994 12,948 7,633
Financial Ratios
Retention rate1 0.52 -0.16 0.23 -3.87 0.37 0.42
Profit margin2 9.89% 4.48% 6.25% 0.99% 8.52% 7.82%
Asset turnover3 0.38 0.32 0.33 0.30 0.32 0.49
Financial leverage4 2.28 2.27 2.46 2.57 2.91 3.35
Averages
Retention rate 0.28
Profit margin 6.33%
Asset turnover 0.33
Financial leverage 2.64
 
FCFE growth rate (g)5 1.53%

Based on: 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30).

2021 Calculations

1 Retention rate = (Net income – Cash dividends, common – Cash dividends, preferred) ÷ (Net income – Cash dividends, preferred)
= (2,092 – 958 – 90) ÷ (2,092 – 90)
= 0.52

2 Profit margin = 100 × (Net income – Cash dividends, preferred) ÷ Revenues
= 100 × (2,092 – 90) ÷ 20,248
= 9.89%

3 Asset turnover = Revenues ÷ Total assets
= 20,248 ÷ 53,866
= 0.38

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 53,866 ÷ 23,677
= 2.28

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.28 × 6.33% × 0.33 × 2.64
= 1.53%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (74,014 × 11.21% – 3,173) ÷ (74,014 + 3,173)
= 6.64%

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

FCFE growth rate (g) forecast

Becton, Dickinson & Co., H-model

Microsoft Excel
Year Value gt
1 g1 1.53%
2 g2 2.81%
3 g3 4.08%
4 g4 5.36%
5 and thereafter g5 6.64%

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)
= 1.53% + (6.64% – 1.53%) × (2 – 1) ÷ (5 – 1)
= 2.81%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.53% + (6.64% – 1.53%) × (3 – 1) ÷ (5 – 1)
= 4.08%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.53% + (6.64% – 1.53%) × (4 – 1) ÷ (5 – 1)
= 5.36%