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.
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Hubbell Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Enterprise Value (EV)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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Intrinsic Stock Value (Valuation Summary)
Year | Value | FCFEt or Terminal value (TVt) | Calculation | Present value at |
---|---|---|---|---|
01 | FCFE0 | |||
1 | FCFE1 | = × (1 + ) | ||
2 | FCFE2 | = × (1 + ) | ||
3 | FCFE3 | = × (1 + ) | ||
4 | FCFE4 | = × (1 + ) | ||
5 | FCFE5 | = × (1 + ) | ||
5 | Terminal value (TV5) | = × (1 + ) ÷ ( – ) | ||
Intrinsic value of Hubbell Inc. common stock | ||||
Intrinsic value of Hubbell Inc. common stock (per share) | ||||
Current share price |
Based on: 10-K (reporting date: 2022-12-31).
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)
Assumptions | ||
Rate of return on LT Treasury Composite1 | RF | |
Expected rate of return on market portfolio2 | E(RM) | |
Systematic risk of Hubbell Inc. common stock | βHUBB | |
Required rate of return on Hubbell Inc. common stock3 | rHUBB |
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).
3 rHUBB = RF + βHUBB [E(RM) – RF]
= + [ – ]
=
FCFE Growth Rate (g)
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 attributable to Hubbell Incorporated – Cash dividends declared) ÷ Net income attributable to Hubbell Incorporated
= ( – ) ÷
=
2 Profit margin = 100 × Net income attributable to Hubbell Incorporated ÷ Net sales
= 100 × ÷
=
3 Asset turnover = Net sales ÷ Total assets
= ÷
=
4 Financial leverage = Total assets ÷ Total Hubbell Incorporated shareholders’ equity
= ÷
=
5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × ×
=
FCFE growth rate (g) implied by single-stage model
g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × ( × – ) ÷ ( + )
=
where:
Equity market value0 = current market value of Hubbell Inc. common stock (US$ in thousands)
FCFE0 = the last year Hubbell Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Hubbell Inc. common stock
Year | Value | gt |
---|---|---|
1 | g1 | |
2 | g2 | |
3 | g3 | |
4 | g4 | |
5 and thereafter | g5 |
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)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=