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- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin Quarterly Data
- Analysis of Liquidity Ratios Quarterly Data
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity Quarterly Data
- Common Stock Valuation Ratios Quarterly Data
Present Value of Free Cash Flow to the Firm (FCFF)
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)
Boston Scientific Corp., free cash flow to the firm (FCFF) forecast
US$ in millions, except per share data
Year | Value | FCFF_{t} or Terminal value (TV_{t}) | Calculation | Present value at |
---|---|---|---|---|
0^{1} | FCFF_{0} | |||
1 | FCFF_{1} | = × (1 + ) | ||
2 | FCFF_{2} | = × (1 + ) | ||
3 | FCFF_{3} | = × (1 + ) | ||
4 | FCFF_{4} | = × (1 + ) | ||
5 | FCFF_{5} | = × (1 + ) | ||
5 | Terminal value (TV_{5}) | = × (1 + ) ÷ ( – ) | ||
Intrinsic value of Boston Scientific Corp.’s capital | ||||
Less: 5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (fair value) | ||||
Less: Outstanding debt obligations (fair value) | ||||
Intrinsic value of Boston Scientific Corp.’s common stock | ||||
Intrinsic value of Boston Scientific Corp.’s common stock (per share) | ||||
Current share price |
Based on: 10-K (filing date: 2021-02-23).
^{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)
Boston Scientific Corp., cost of capital
Value^{1} | Weight | Required rate of return^{2} | Calculation | |
---|---|---|---|---|
Equity (fair value) | ||||
5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per share (fair value) | ||||
Outstanding debt obligations (fair value) | = × (1 – ) |
Based on: 10-K (filing date: 2021-02-23).
^{1} US$ in millions
^{ } Equity (fair value) = No. shares of common stock outstanding × Current share price
= ×
=
^{ } Outstanding debt obligations (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
= ( + + + + ) ÷ 5
=
WACC =
FCFF Growth Rate (g)
FCFF growth rate (g) implied by PRAT model
Boston Scientific Corp., PRAT model
Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-23).
^{1} See details »
2020 Calculations
^{2} Interest expense, after tax = Interest expense × (1 – EITR)
= × (1 – )
=
^{3} EBIT(1 – EITR)
= Net income (loss) + Interest expense, after tax
= +
=
^{4} RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [ – ] ÷
=
^{5} ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × ÷
=
^{6} g = RR × ROIC
= ×
=
FCFF growth rate (g) implied by single-stage model
g = 100 × (Total capital, fair value_{0} × WACC – FCFF_{0}) ÷ (Total capital, fair value_{0} + FCFF_{0})
= 100 × ( × – ) ÷ ( + )
=
where:
Total capital, fair value_{0} = current fair value of Boston Scientific Corp.’s debt and equity (US$ in millions)
FCFF_{0} = the last year Boston Scientific Corp.’s free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Boston Scientific Corp.’s capital
FCFF growth rate (g) forecast
Boston Scientific Corp., H-model
Year | Value | g_{t} |
---|---|---|
1 | g_{1} | |
2 | g_{2} | |
3 | g_{3} | |
4 | g_{4} | |
5 and thereafter | g_{5} |
where:
g_{1} is implied by PRAT model
g_{5} is implied by single-stage model
g_{2}, g_{3} and g_{4} are calculated using linear interpoltion between g_{1} and g_{5}
Calculations
g_{2} = g_{1} + (g_{5} – g_{1}) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g_{3} = g_{1} + (g_{5} – g_{1}) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g_{4} = g_{1} + (g_{5} – g_{1}) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=