Stock Analysis on Net
Stock Analysis on Net

Johnson Controls International plc (NYSE:JCI)

This company has been moved to the archive! The financial data has not been updated since May 1, 2024.

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)

Johnson Controls International plc, free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 16.75%
01 FCFE0 1,281
1 FCFE1 1,340 = 1,281 × (1 + 4.62%) 1,148
2 FCFE2 1,431 = 1,340 × (1 + 6.76%) 1,050
3 FCFE3 1,558 = 1,431 × (1 + 8.90%) 979
4 FCFE4 1,730 = 1,558 × (1 + 11.04%) 931
5 FCFE5 1,958 = 1,730 × (1 + 13.19%) 903
5 Terminal value (TV5) 62,277 = 1,958 × (1 + 13.19%) ÷ (16.75% – 13.19%) 28,716
Intrinsic value of Johnson Controls International plc common stock 33,727
 
Intrinsic value of Johnson Controls International plc common stock (per share) $50.06
Current share price $60.47

Based on: 10-K (reporting date: 2023-09-30).

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) 14.44%
Systematic risk of Johnson Controls International plc common stock βJCI 1.24
 
Required rate of return on Johnson Controls International plc common stock3 rJCI 16.75%

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 rJCI = RF + βJCI [E(RM) – RF]
= 4.79% + 1.24 [14.44% – 4.79%]
= 16.75%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Johnson Controls International plc, PRAT model

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Average Sep 30, 2023 Sep 30, 2022 Sep 30, 2021 Sep 30, 2020 Sep 30, 2019 Sep 30, 2018
Selected Financial Data (US$ in millions)
Cash dividends declared 991 965 771 780 887 968
Net income attributable to Johnson Controls 1,849 1,532 1,637 631 5,674 2,162
Net sales 26,793 25,299 23,668 22,317 23,968 31,400
Total assets 42,242 42,158 41,890 40,815 42,287 48,797
Shareholders’ equity attributable to Johnson Controls 16,545 16,268 17,562 17,447 19,766 21,164
Financial Ratios
Retention rate1 0.46 0.37 0.53 -0.24 0.84 0.55
Profit margin2 6.90% 6.06% 6.92% 2.83% 23.67% 6.89%
Asset turnover3 0.63 0.60 0.57 0.55 0.57 0.64
Financial leverage4 2.55 2.59 2.39 2.34 2.14 2.31
Averages
Retention rate 0.55
Profit margin 5.92%
Asset turnover 0.59
Financial leverage 2.39
 
FCFE growth rate (g)5 4.62%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).

2023 Calculations

1 Retention rate = (Net income attributable to Johnson Controls – Cash dividends declared) ÷ Net income attributable to Johnson Controls
= (1,849 – 991) ÷ 1,849
= 0.46

2 Profit margin = 100 × Net income attributable to Johnson Controls ÷ Net sales
= 100 × 1,849 ÷ 26,793
= 6.90%

3 Asset turnover = Net sales ÷ Total assets
= 26,793 ÷ 42,242
= 0.63

4 Financial leverage = Total assets ÷ Shareholders’ equity attributable to Johnson Controls
= 42,242 ÷ 16,545
= 2.55

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.55 × 5.92% × 0.59 × 2.39
= 4.62%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (40,737 × 16.75% – 1,281) ÷ (40,737 + 1,281)
= 13.19%

where:
Equity market value0 = current market value of Johnson Controls International plc common stock (US$ in millions)
FCFE0 = the last year Johnson Controls International plc free cash flow to equity (US$ in millions)
r = required rate of return on Johnson Controls International plc common stock

FCFE growth rate (g) forecast

Johnson Controls International plc, H-model

Microsoft Excel
Year Value gt
1 g1 4.62%
2 g2 6.76%
3 g3 8.90%
4 g4 11.04%
5 and thereafter g5 13.19%

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)
= 4.62% + (13.19% – 4.62%) × (2 – 1) ÷ (5 – 1)
= 6.76%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 4.62% + (13.19% – 4.62%) × (3 – 1) ÷ (5 – 1)
= 8.90%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 4.62% + (13.19% – 4.62%) × (4 – 1) ÷ (5 – 1)
= 11.04%