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 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)

Becton, Dickinson & Co., 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 9.30%
01 FCFF0 3,898
1 FCFF1 3,935 = 3,898 × (1 + 0.95%) 3,600
2 FCFF2 4,012 = 3,935 × (1 + 1.95%) 3,358
3 FCFF3 4,131 = 4,012 × (1 + 2.96%) 3,164
4 FCFF4 4,295 = 4,131 × (1 + 3.97%) 3,009
5 FCFF5 4,509 = 4,295 × (1 + 4.98%) 2,890
5 Terminal value (TV5) 109,499 = 4,509 × (1 + 4.98%) ÷ (9.30% – 4.98%) 70,192
Intrinsic value of Becton, Dickinson & Co. capital 86,215
Less: 6.125% Cumulative Preferred Stock, Series A (fair value) 0
Less: 6.00% Mandatory Convertible Preferred Stock, Series B (fair value) 1,619
Less: Debt (fair value) 19,040
Intrinsic value of Becton, Dickinson & Co. common stock 65,556
 
Intrinsic value of Becton, Dickinson & Co. common stock (per share) $229.97
Current share price $259.64

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

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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)

Becton, Dickinson & Co., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 74,014 0.78 11.21%
6.125% Cumulative Preferred Stock, Series A (fair value) 0 0.00 0.00%
6.00% Mandatory Convertible Preferred Stock, Series B (fair value) 1,619 0.02 5.56%
Debt (fair value) 19,040 0.20 2.20% = 2.65% × (1 – 17.00%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 285,064,629 × $259.64
= $74,014,180,273.56

   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
= (6.70% + 11.30% + 21.00% + 18.90% + 35.00% + 9.10%) ÷ 6
= 17.00%

WACC = 9.30%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Becton, Dickinson & Co., PRAT model

Microsoft Excel
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)
Interest expense 469 528 639 706 521 388
Net income 2,092 874 1,233 311 1,100 976
 
Effective income tax rate (EITR)1 6.70% 11.30% 21.00% 18.90% 35.00% 9.10%
 
Interest expense, after tax2 438 468 505 573 339 353
Add: Cash dividends, preferred 90 107 152 152 70 —
Add: Cash dividends, common 958 888 832 775 645 562
Interest expense (after tax) and dividends 1,486 1,463 1,489 1,500 1,054 915
 
EBIT(1 – EITR)3 2,530 1,342 1,738 884 1,439 1,329
 
Short-term debt 500 707 1,309 2,601 203 1,001
Long-term debt, excluding current portion 17,110 17,224 18,081 18,894 18,667 10,550
Shareholders’ equity 23,677 23,765 21,081 20,994 12,948 7,633
Total capital 41,287 41,696 40,471 42,489 31,818 19,184
Financial Ratios
Retention rate (RR)4 0.41 -0.09 0.14 -0.70 0.27 0.31
Return on invested capital (ROIC)5 6.13% 3.22% 4.29% 2.08% 4.52% 6.93%
Averages
RR 0.21
ROIC 4.53%
 
FCFF growth rate (g)6 0.95%

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).

1 See details »

2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 469 × (1 – 6.70%)
= 438

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 2,092 + 438
= 2,530

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,530 – 1,486] ÷ 2,530
= 0.41

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,530 ÷ 41,287
= 6.13%

6 g = RR × ROIC
= 0.21 × 4.53%
= 0.95%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (94,673 × 9.30% – 3,898) ÷ (94,673 + 3,898)
= 4.98%

where:

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

FCFF growth rate (g) forecast

Becton, Dickinson & Co., H-model

Microsoft Excel
Year Value gt
1 g1 0.95%
2 g2 1.95%
3 g3 2.96%
4 g4 3.97%
5 and thereafter g5 4.98%

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)
= 0.95% + (4.98% – 0.95%) × (2 – 1) ÷ (5 – 1)
= 1.95%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.95% + (4.98% – 0.95%) × (3 – 1) ÷ (5 – 1)
= 2.96%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.95% + (4.98% – 0.95%) × (4 – 1) ÷ (5 – 1)
= 3.97%