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 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)

Old Dominion Freight Line 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 15.42%
01 FCFF0 943,925
1 FCFF1 1,159,630 = 943,925 × (1 + 22.85%) 1,004,694
2 FCFF2 1,396,147 = 1,159,630 × (1 + 20.40%) 1,047,996
3 FCFF3 1,646,614 = 1,396,147 × (1 + 17.94%) 1,070,865
4 FCFF4 1,901,574 = 1,646,614 × (1 + 15.48%) 1,071,446
5 FCFF5 2,149,307 = 1,901,574 × (1 + 13.03%) 1,049,229
5 Terminal value (TV5) 101,500,788 = 2,149,307 × (1 + 13.03%) ÷ (15.42% – 13.03%) 49,549,699
Intrinsic value of Old Dominion Freight Line Inc. capital 54,793,929
Less: Long-term debt, including current maturities (fair value) 92,600
Intrinsic value of Old Dominion Freight Line Inc. common stock 54,701,329
 
Intrinsic value of Old Dominion Freight Line Inc. common stock (per share) $500.62
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.

Weighted Average Cost of Capital (WACC)

Old Dominion Freight Line Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 44,484,128 1.00 15.45%
Long-term debt, including current maturities (fair value) 92,600 0.00 2.70% = 3.62% × (1 – 25.42%)

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
= 109,268,081 × $407.11
= $44,484,128,455.91

   Long-term debt, including current maturities (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
= (25.21% + 25.50% + 25.37% + 25.30% + 25.73%) ÷ 5
= 25.42%

WACC = 15.42%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Old Dominion Freight Line 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 1,563 1,727 2,782 377 189
Net income 1,377,159 1,034,375 672,682 615,518 605,668
 
Effective income tax rate (EITR)1 25.21% 25.50% 25.37% 25.30% 25.73%
 
Interest expense, after tax2 1,169 1,287 2,076 282 140
Add: Cash dividends declared 134,478 92,389 71,046 54,584 42,594
Interest expense (after tax) and dividends 135,647 93,676 73,122 54,866 42,734
 
EBIT(1 – EITR)3 1,378,328 1,035,662 674,758 615,800 605,808
 
Current maturities of long-term debt 20,000 — — — —
Long-term debt, excluding current maturities 79,963 99,947 99,931 45,000 45,000
Shareholders’ equity 3,652,917 3,679,807 3,326,288 3,080,717 2,680,483
Total capital 3,752,880 3,779,754 3,426,219 3,125,717 2,725,483
Financial Ratios
Retention rate (RR)4 0.90 0.91 0.89 0.91 0.93
Return on invested capital (ROIC)5 36.73% 27.40% 19.69% 19.70% 22.23%
Averages
RR 0.91
ROIC 25.15%
 
FCFF growth rate (g)6 22.85%

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, after tax = Interest expense × (1 – EITR)
= 1,563 × (1 – 25.21%)
= 1,169

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 1,377,159 + 1,169
= 1,378,328

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,378,328 – 135,647] ÷ 1,378,328
= 0.90

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,378,328 ÷ 3,752,880
= 36.73%

6 g = RR × ROIC
= 0.91 × 25.15%
= 22.85%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (44,576,728 × 15.42% – 943,925) ÷ (44,576,728 + 943,925)
= 13.03%

where:

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

FCFF growth rate (g) forecast

Old Dominion Freight Line Inc., H-model

Microsoft Excel
Year Value gt
1 g1 22.85%
2 g2 20.40%
3 g3 17.94%
4 g4 15.48%
5 and thereafter g5 13.03%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 22.85% + (13.03% – 22.85%) × (2 – 1) ÷ (5 – 1)
= 20.40%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 22.85% + (13.03% – 22.85%) × (3 – 1) ÷ (5 – 1)
= 17.94%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 22.85% + (13.03% – 22.85%) × (4 – 1) ÷ (5 – 1)
= 15.48%