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Discounted Cash Flow Analysis - Steel Dynamics (Unlevered DCF)

($ in Millions Except Per Share Data)


Steel Dynamics - Free Cash Flow Projectio

Historical
2010

2009
Revenue:
Revenue Growth Rate:
Operating Income:
Operating Margin:

Less: Taxes, Excluding Effect of Interest:

3,959 $
N/A
120
3.0%

2011

6,301 $
59.2%
365
5.8%

2012

7,998 $
26.9%
585
7.3%

2013

9,597 $
20.0%
516
5.4%

Projected
2014

Steel Dynamics - DCF Assumptions & Outp


2015

2016

11,037 $
15.0%
593
5.4%

12,140 $
10.0%
652
5.4%

13,111 $
8.0%
705
5.4%

13,767
5.0%
740
5.4%

(45)

(139)

(222)

(196)

(225)

(248)

(268)

(281)

74

226

363

320

368

404

437

459

Adjustments for Non-Cash Charges:


Depreciation & Amortization:
% Revenue:
Impairment Charges:
Equity-Based Compensation:
% Revenue:
Deferred Income Taxes:
% Revenue:
(Gain) / Loss on PP&E Disposal:

221
5.6%
18
0.4%
93
2.3%
1

225
3.6%
13
15
0.2%
46
0.7%
1

223
2.8%
17
0.2%
34
0.4%
(4)

382
4.0%
29
0.3%
112
1.2%
-

439
4.0%
33
0.3%
129
1.2%
-

483
4.0%
36
0.3%
142
1.2%
-

522
4.0%
39
0.3%
153
1.2%
-

548
4.0%
41
0.3%
161
1.2%
-

Changes in Working Capital:


Decrease / (Increase) in AR:
Decrease / (Increase) in Inventory:
Decrease / (Increase) in Other Assets:
Increase / (Decrease) in AP:
Increase / (Decrease) in Inc. Tax Payable:
Increase / (Decrease) in Accrued Expenses:
Net Decrease / (Increase):
% Revenue:

72
175
4
(9)
2
(120)
124
3.1%

(197)
(261)
(15)
71
99
43
(260)
(4.1%)

(101)
(86)
6
57
26
48
(50)
(0.6%)

(51)
(0.5%)

(59)
(0.5%)

(65)
(0.5%)

(70)
(0.5%)

(74)
(0.5%)

(330)
(8.3%)

(133)
(2.1%)

(167)
(2.1%)

(288)
(3.0%)

(331)
(3.0%)

(364)
(3.0%)

(393)
(3.0%)

(413)
(3.0%)

Net Operating Profit After Tax (NOPAT):

Less: Capital Expenditures


% Revenue:
Unlevered Free Cash Flow
Present Value of Free Cash Flow

Effective Tax Rate:


Use Multiples Method?
Discount Rate (WACC):
Terminal EBITDA Multiple:
Terminal Growth Rate:
Terminal Value:
PV of Terminal Value:
Sum of PV of Cash Flows:
Enterprise Value:
Simplifications:

Should calculate Equity Value and Per Share Val


Should create sensitivity tables.

Should build in revenue growth and margin


assumptions into assumptions & output above.
Should look at Working Capital in more detail.
Should look at real calculations for WACC,
Discount Rate, and Beta.

503
466

578
496

636
505

687
505

722
491

Should analyze revenue and margins in more d

Should look at mid-year discounts and stub per

Should look at alternative multiples for Termina


Multiples method.

Verify CapEx and D&A assumptions in more dep


Discount Period:
EBITDA Calculation:
Operating Income:
Plus: Depreciation & Amortization:
EBITDA:

1.000

120
221
341

365
225
589

585
223
807

516
382
898

2.000

593
439
1,032

3.000

652
483
1,136

4.000

705
522
1,227

5.000

740
548
1,288

Steel Dynamics - DCF Assumptions & Output

Effective Tax Rate:

38.0%

Use Multiples Method?


Discount Rate (WACC):
Terminal EBITDA Multiple:

No
8.0%
6.0 x

Terminal Growth Rate:


Terminal Value:

PV of Terminal Value:
Sum of PV of Cash Flows:
Enterprise Value:

2.0%
12,266
8,348
2,463
10,811

Simplifications:
Should calculate Equity Value and Per Share Value.
Should create sensitivity tables.
Should build in revenue growth and margin
assumptions into assumptions & output above.
Should look at Working Capital in more detail.
Should look at real calculations for WACC,
Discount Rate, and Beta.
Should analyze revenue and margins in more depth.
Should look at mid-year discounts and stub periods.
Should look at alternative multiples for Terminal
Multiples method.
Verify CapEx and D&A assumptions in more depth.

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