Stock Analysis on Net
Stock Analysis on Net

Old Dominion Freight Line Inc. (NASDAQ:ODFL)

This company has been moved to the archive! The financial data has not been updated since August 4, 2023.

Present Value of Free Cash Flow to Equity (FCFE) 

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 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)

Old Dominion Freight Line Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 14.31%
01 FCFE0 938,530
1 FCFE1 1,155,499 = 938,530 × (1 + 23.12%) 1,010,821
2 FCFE2 1,390,368 = 1,155,499 × (1 + 20.33%) 1,063,995
3 FCFE3 1,634,161 = 1,390,368 × (1 + 17.53%) 1,093,980
4 FCFE4 1,875,080 = 1,634,161 × (1 + 14.74%) 1,098,093
5 FCFE5 2,099,170 = 1,875,080 × (1 + 11.95%) 1,075,404
5 Terminal value (TV5) 99,495,731 = 2,099,170 × (1 + 11.95%) ÷ (14.31% – 11.95%) 50,971,647
Intrinsic value of Old Dominion Freight Line Inc. common stock 56,313,940
 
Intrinsic value of Old Dominion Freight Line Inc. common stock (per share) $515.37
Current share price $407.11

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.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.79%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of Old Dominion Freight Line Inc. common stock βODFL 1.06
 
Required rate of return on Old Dominion Freight Line Inc. common stock3 rODFL 14.31%

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 rODFL = RF + βODFL [E(RM) – RF]
= 4.79% + 1.06 [13.79% – 4.79%]
= 14.31%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Old Dominion Freight Line Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Cash dividends declared 134,478 92,389 71,046 54,584 42,594
Net income 1,377,159 1,034,375 672,682 615,518 605,668
Revenue from operations 6,260,077 5,256,328 4,015,129 4,109,111 4,043,695
Total assets 4,838,610 4,821,544 4,369,410 3,995,568 3,545,283
Shareholders’ equity 3,652,917 3,679,807 3,326,288 3,080,717 2,680,483
Financial Ratios
Retention rate1 0.90 0.91 0.89 0.91 0.93
Profit margin2 22.00% 19.68% 16.75% 14.98% 14.98%
Asset turnover3 1.29 1.09 0.92 1.03 1.14
Financial leverage4 1.32 1.31 1.31 1.30 1.32
Averages
Retention rate 0.91
Profit margin 17.68%
Asset turnover 1.09
Financial leverage 1.31
 
FCFE growth rate (g)5 23.12%

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).

2022 Calculations

1 Retention rate = (Net income – Cash dividends declared) ÷ Net income
= (1,377,159 – 134,478) ÷ 1,377,159
= 0.90

2 Profit margin = 100 × Net income ÷ Revenue from operations
= 100 × 1,377,159 ÷ 6,260,077
= 22.00%

3 Asset turnover = Revenue from operations ÷ Total assets
= 6,260,077 ÷ 4,838,610
= 1.29

4 Financial leverage = Total assets ÷ Shareholders’ equity
= 4,838,610 ÷ 3,652,917
= 1.32

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.91 × 17.68% × 1.09 × 1.31
= 23.12%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (44,484,128 × 14.31% – 938,530) ÷ (44,484,128 + 938,530)
= 11.95%

where:
Equity market value0 = current market value of Old Dominion Freight Line Inc. common stock (US$ in thousands)
FCFE0 = the last year Old Dominion Freight Line Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Old Dominion Freight Line Inc. common stock

FCFE growth rate (g) forecast

Old Dominion Freight Line Inc., H-model

Microsoft Excel
Year Value gt
1 g1 23.12%
2 g2 20.33%
3 g3 17.53%
4 g4 14.74%
5 and thereafter g5 11.95%

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)
= 23.12% + (11.95% – 23.12%) × (2 – 1) ÷ (5 – 1)
= 20.33%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 23.12% + (11.95% – 23.12%) × (3 – 1) ÷ (5 – 1)
= 17.53%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 23.12% + (11.95% – 23.12%) × (4 – 1) ÷ (5 – 1)
= 14.74%