Stock Analysis on Net
Stock Analysis on Net

Hubbell Inc. (NYSE:HUBB)

This company has been moved to the archive! The financial data has not been updated since November 1, 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)

Hubbell Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 13.41%
01 FCFF0 544,283
1 FCFF1 573,097 = 544,283 × (1 + 5.29%) 505,347
2 FCFF2 609,803 = 573,097 × (1 + 6.40%) 474,147
3 FCFF3 655,634 = 609,803 × (1 + 7.52%) 449,517
4 FCFF4 712,191 = 655,634 × (1 + 8.63%) 430,569
5 FCFF5 781,538 = 712,191 × (1 + 9.74%) 416,638
5 Terminal value (TV5) 23,372,403 = 781,538 × (1 + 9.74%) ÷ (13.41% – 9.74%) 12,459,812
Intrinsic value of Hubbell Inc. capital 14,736,031
Less: Debt (fair value) 1,311,200
Intrinsic value of Hubbell Inc. common stock 13,424,831
 
Intrinsic value of Hubbell Inc. common stock (per share) $250.36
Current share price $279.10

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)

Hubbell Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 14,965,914 0.92 14.36%
Debt (fair value) 1,311,200 0.08 2.48% = 3.14% × (1 – 21.06%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 53,622,050 × $279.10
= $14,965,914,155.00

   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
= (21.30% + 19.20% + 21.50% + 21.70% + 21.60%) ÷ 5
= 21.06%

WACC = 13.41%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Hubbell 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 thousands)
Interest expense, net 49,600 54,700 60,300 69,400 72,400
Income from discontinued operations, net of tax 34,600 34,500 — — —
Net income attributable to Hubbell Incorporated 545,900 399,500 351,200 400,900 360,200
 
Effective income tax rate (EITR)1 21.30% 19.20% 21.50% 21.70% 21.60%
 
Interest expense, net, after tax2 39,035 44,198 47,336 54,340 56,762
Add: Cash dividends declared 229,900 217,400 201,800 187,000 172,800
Interest expense (after tax) and dividends 268,935 261,598 249,136 241,340 229,562
 
EBIT(1 – EITR)3 550,335 409,198 398,536 455,240 416,962
 
Short-term debt and current portion of long-term debt 4,700 9,700 153,100 65,400 56,100
Long-term debt, excluding current portion 1,437,900 1,435,500 1,436,900 1,506,000 1,737,100
Total Hubbell Incorporated shareholders’ equity 2,360,900 2,229,800 2,070,000 1,947,100 1,780,600
Total capital 3,803,500 3,675,000 3,660,000 3,518,500 3,573,800
Financial Ratios
Retention rate (RR)4 0.51 0.36 0.37 0.47 0.45
Return on invested capital (ROIC)5 14.47% 11.13% 10.89% 12.94% 11.67%
Averages
RR 0.43
ROIC 12.22%
 
FCFF growth rate (g)6 5.29%

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, after tax = Interest expense, net × (1 – EITR)
= 49,600 × (1 – 21.30%)
= 39,035

3 EBIT(1 – EITR) = Net income attributable to Hubbell Incorporated – Income from discontinued operations, net of tax + Interest expense, net, after tax
= 545,900 – 34,600 + 39,035
= 550,335

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [550,335 – 268,935] ÷ 550,335
= 0.51

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 550,335 ÷ 3,803,500
= 14.47%

6 g = RR × ROIC
= 0.43 × 12.22%
= 5.29%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (16,277,114 × 13.41% – 544,283) ÷ (16,277,114 + 544,283)
= 9.74%

where:

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

FCFF growth rate (g) forecast

Hubbell Inc., H-model

Microsoft Excel
Year Value gt
1 g1 5.29%
2 g2 6.40%
3 g3 7.52%
4 g4 8.63%
5 and thereafter g5 9.74%

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)
= 5.29% + (9.74% – 5.29%) × (2 – 1) ÷ (5 – 1)
= 6.40%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 5.29% + (9.74% – 5.29%) × (3 – 1) ÷ (5 – 1)
= 7.52%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 5.29% + (9.74% – 5.29%) × (4 – 1) ÷ (5 – 1)
= 8.63%