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 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)

Hubbell 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 14.47%
01 FCFE0 502,100
1 FCFE1 552,223 = 502,100 × (1 + 9.98%) 482,432
2 FCFE2 608,410 = 552,223 × (1 + 10.17%) 464,344
3 FCFE3 671,483 = 608,410 × (1 + 10.37%) 447,713
4 FCFE4 742,383 = 671,483 × (1 + 10.56%) 432,429
5 FCFE5 822,196 = 742,383 × (1 + 10.75%) 418,392
5 Terminal value (TV5) 24,506,899 = 822,196 × (1 + 10.75%) ÷ (14.47% – 10.75%) 12,470,850
Intrinsic value of Hubbell Inc. common stock 14,716,159
 
Intrinsic value of Hubbell Inc. common stock (per share) $274.44
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.

Required Rate of Return (r)

Microsoft Excel
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 Hubbell Inc. common stock βHUBB 1.07
 
Required rate of return on Hubbell Inc. common stock3 rHUBB 14.47%

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 rHUBB = RF + βHUBB [E(RM) – RF]
= 4.79% + 1.07 [13.79% – 4.79%]
= 14.47%

FCFE Growth Rate (g)

FCFE 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)
Cash dividends declared 229,900 217,400 201,800 187,000 172,800
Net income attributable to Hubbell Incorporated 545,900 399,500 351,200 400,900 360,200
Net sales 4,947,900 4,194,100 4,186,000 4,591,000 4,481,700
Total assets 5,402,600 5,281,500 5,085,100 4,903,000 4,872,100
Total Hubbell Incorporated shareholders’ equity 2,360,900 2,229,800 2,070,000 1,947,100 1,780,600
Financial Ratios
Retention rate1 0.58 0.46 0.43 0.53 0.52
Profit margin2 11.03% 9.53% 8.39% 8.73% 8.04%
Asset turnover3 0.92 0.79 0.82 0.94 0.92
Financial leverage4 2.29 2.37 2.46 2.52 2.74
Averages
Retention rate 0.50
Profit margin 9.14%
Asset turnover 0.88
Financial leverage 2.47
 
FCFE growth rate (g)5 9.98%

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
= (545,900 – 229,900) ÷ 545,900
= 0.58

2 Profit margin = 100 × Net income attributable to Hubbell Incorporated ÷ Net sales
= 100 × 545,900 ÷ 4,947,900
= 11.03%

3 Asset turnover = Net sales ÷ Total assets
= 4,947,900 ÷ 5,402,600
= 0.92

4 Financial leverage = Total assets ÷ Total Hubbell Incorporated shareholders’ equity
= 5,402,600 ÷ 2,360,900
= 2.29

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.50 × 9.14% × 0.88 × 2.47
= 9.98%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (14,965,914 × 14.47% – 502,100) ÷ (14,965,914 + 502,100)
= 10.75%

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

FCFE growth rate (g) forecast

Hubbell Inc., H-model

Microsoft Excel
Year Value gt
1 g1 9.98%
2 g2 10.17%
3 g3 10.37%
4 g4 10.56%
5 and thereafter g5 10.75%

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)
= 9.98% + (10.75% – 9.98%) × (2 – 1) ÷ (5 – 1)
= 10.17%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 9.98% + (10.75% – 9.98%) × (3 – 1) ÷ (5 – 1)
= 10.37%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 9.98% + (10.75% – 9.98%) × (4 – 1) ÷ (5 – 1)
= 10.56%