Stock Analysis on Net
Stock Analysis on Net

Bristol-Myers Squibb Co. (NYSE:BMY)

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)

Bristol-Myers Squibb 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 6.92%
01 FCFF0 13,795
1 FCFF1 13,994 = 13,795 × (1 + 1.44%) 13,088
2 FCFF2 14,081 = 13,994 × (1 + 0.63%) 12,317
3 FCFF3 14,055 = 14,081 × (1 + -0.19%) 11,499
4 FCFF4 13,915 = 14,055 × (1 + -1.00%) 10,647
5 FCFF5 13,662 = 13,915 × (1 + -1.81%) 9,777
5 Terminal value (TV5) 153,558 = 13,662 × (1 + -1.81%) ÷ (6.92% – -1.81%) 109,890
Intrinsic value of Bristol-Myers Squibb Co. capital 167,217
Less: Debt (fair value) 36,946
Intrinsic value of Bristol-Myers Squibb Co. common stock 130,271
 
Intrinsic value of Bristol-Myers Squibb Co. common stock (per share) $64.23
Current share price $58.23

Based on: 10-K (reporting date: 2023-12-31).

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)

Bristol-Myers Squibb Co., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 118,101 0.76 8.12%
Debt (fair value) 36,946 0.24 3.08% = 3.73% × (1 – 17.46%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 2,028,176,674 × $58.23
= $118,100,727,727.02

   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
= (4.70% + 17.70% + 13.40% + 21.00% + 30.50%) ÷ 5
= 17.46%

WACC = 6.92%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Bristol-Myers Squibb Co., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense 1,166 1,232 1,334 1,420 656
Net earnings (loss) attributable to BMS 8,025 6,327 6,994 (9,015) 3,439
 
Effective income tax rate (EITR)1 4.70% 17.70% 13.40% 21.00% 30.50%
 
Interest expense, after tax2 1,111 1,014 1,155 1,122 456
Add: Cash dividends declared 4,762 4,644 4,455 4,178 3,035
Interest expense (after tax) and dividends 5,873 5,658 5,610 5,300 3,491
 
EBIT(1 – EITR)3 9,136 7,341 8,149 (7,893) 3,895
 
Short-term debt obligations 3,119 4,264 4,948 2,340 3,346
Long-term debt, excluding current portion 36,653 35,056 39,605 48,336 43,387
Total BMS shareholders’ equity 29,430 31,061 35,946 37,822 51,598
Total capital 69,202 70,381 80,499 88,498 98,331
Financial Ratios
Retention rate (RR)4 0.36 0.23 0.31 — 0.10
Return on invested capital (ROIC)5 13.20% 10.43% 10.12% -8.92% 3.96%
Averages
RR 0.25
ROIC 5.76%
 
FCFF growth rate (g)6 1.44%

Based on: 10-K (reporting date: 2023-12-31), 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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 1,166 × (1 – 4.70%)
= 1,111

3 EBIT(1 – EITR) = Net earnings (loss) attributable to BMS + Interest expense, after tax
= 8,025 + 1,111
= 9,136

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [9,136 – 5,873] ÷ 9,136
= 0.36

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 9,136 ÷ 69,202
= 13.20%

6 g = RR × ROIC
= 0.25 × 5.76%
= 1.44%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (155,047 × 6.92% – 13,795) ÷ (155,047 + 13,795)
= -1.81%

where:

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

FCFF growth rate (g) forecast

Bristol-Myers Squibb Co., H-model

Microsoft Excel
Year Value gt
1 g1 1.44%
2 g2 0.63%
3 g3 -0.19%
4 g4 -1.00%
5 and thereafter g5 -1.81%

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)
= 1.44% + (-1.81% – 1.44%) × (2 – 1) ÷ (5 – 1)
= 0.63%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 1.44% + (-1.81% – 1.44%) × (3 – 1) ÷ (5 – 1)
= -0.19%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 1.44% + (-1.81% – 1.44%) × (4 – 1) ÷ (5 – 1)
= -1.00%