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Eli Lilly and Company
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== DCF Valuation == {| class="wikitable" |+ !Unlevered Free Cash Flow (mn) | | | | | | | | | | | !Net Working Capital (mn) | | | | | | | | | | |- |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E | |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E |- |Revenue |24,556 |22,320 |24,540 |28,318 |28,541 |29,516 |30,772 |32,082 |33,447 |34,871 | |Accounts Receivables |6,205 |5,542 |6,929 |8,127 |8,559 |8,088 |8,433 |8,792 |9,166 |9,556 |- |COGS |(6,430) |(4,721) |(5,483) |(7,313) |(6,630) |(6,561) |(7,307) |(7,618) |(7,943) |(8,281) | |Merchandise Inventory |4,112 |17,641 |18,536 |19,621 |24,388 |18,527 |20,633 |21,512 |22,427 |23,382 |- |Gross Profit |18,126 |17,598 |19,057 |21,006 |21,912 |22,954 |23,464 |24,463 |25,505 |26,590 | |Other Current Assets |2,147 |2,539 |2,872 |2,531 |2,954 |3,017 |3,145 |3,279 |3,419 |3,564 |- |Operating Expenses |(5,307) |(5,595) |(6,086) |(7,026) |(7,191) |(8,140) |(7,477) |(7,795) |(8,127) |(8,473) | |Current Assets (without cash) |12,463 |25,721 |28,337 |30,279 |35,901 |29,632 |32,211 |33,582 |35,012 |36,502 |- |Selling, General, Administrative |(6,390) |(6,004) |(5,869) |(6,142) |(6,068) |(6,515) |(7,372) |(7,686) |(8,013) |(8,354) | | | | | | | | | | | | |- |Total Operating Expenses |(11,697) |(11,599) |(11,955) |(13,168) |(13,258) |(14,656) |(14,849) |(15,481) |(16,140) |(16,827) | |Accounts Payable and Accrued Expenses,Current |7,489 |7,171 |8,725 |9,529 |12,207 |9,736 |10,843 |11,304 |11,786 |12,287 |- |Operating Profit (EBITDA) |6,429 |5,999 |7,101 |7,838 |8,653 |8,299 |8,616 |8,983 |9,365 |9,764 | |Financial Liabilities, Current |1,131 |1,499 |9 |1,538 |1,501 |1,055 |1,100 |1,147 |1,196 |1,247 |- |D&A |1,609 |1,233 |1,324 |1,548 |1,523 |7,431 |183 |184 |186 |188 | |Provisions, Current |1,055 |916 |997 |958 |1,060 |1,154 |1,204 |1,255 |1,308 |1,364 |- |EBIT |4,820 |4,767 |5,778 |6,290 |7,131 |868 |8,433 |8,798 |9,179 |9,575 | |Defferred Liabilities, Current |0 |0 |0 |0 |0 |0 |0 |0 |0 |0 |- |Operating Taxes |(564) |(628) |(1,036) |(574) |(562) |(783) |(821) |(856) |(892) |(930) | |Other Current Liabilities |0 |15,085 |17,005 |19,600 |23,606 |17,048 |17,774 |18,531 |19,319 |20,142 |- |NOPAT (Net Operating Profit After Taxes) |4,256 |4,139 |4,741 |5,716 |6,569 |85 |7,612 |7,942 |8,286 |8,645 | |Current Liabilities |9,675 |24,671 |26,736 |31,625 |38,374 |28,994 |30,921 |32,237 |33,609 |35,040 |- |(+) Depreciation & Amortization |1,609 |1,233 |1,324 |1,548 |1,523 |7,431 |183 |184 |186 |188 | | | | | | | | | | | | |- |(-) Capital Expenditures |(2,379) |(1,687) |(747) |(1,023) |(15) |(573) |216 |218 |220 |222 | !Assumptions | | | | | | | | | | |- |(-) Change in NWC | -- |(6,727) |3,046 |(1,581) |(2,503) |(258) |653 |55 |57 |60 | |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E |- |NWC |8,662 |1,934 |4,981 |3,400 |896 |638 |1,290 |1,345 |1,403 |1,462 | |Revenue |24,556 |22,320 |24,540 |28,318 |28,541 |29,516 |30,772 |32,082 |33,447 |34,871 |- |Current Assets (non cash) |20,550 |13,710 |17,462 |18,452 |18,035 |29,632 |32,211 |33,582 |35,012 |36,502 | |COGS |(6,430) |(4,721) |(5,483) |(7,313) |(6,630) |(6,561) |(7,307) |(7,618) |(7,943) |(8,281) |- |Current Liabilitites |11,888 |11,775 |12,482 |15,053 |17,138 |28,994 |30,921 |32,237 |33,609 |35,040 | | | | | | | | | | | | |- |Unlevered Free Cash Flow |8,244 |13,786 |3,767 |9,867 |10,610 |8,347 |6,926 |7,854 |8,195 |8,551 | |Days Sales Outstanding (DSO) |91.0 |89.4 |101.6 |103.3 |108.0 |98.7 |98.7 |98.7 |98.7 |98.7 |- | | | | | | | | | | | | |Days Inventory Outstanding (DIO) |230.2 |1345.2 |1217.0 |965.9 |1324.3 |1016.5 |1016.5 |1016.5 |1016.5 |1016.5 |- !Assumptions | | | | | | | | | | | |Days Payable Outstanding (DPO) |419.3 |546.8 |572.9 |469.1 |662.8 |534.2 |534.2 |534.2 |534.2 |534.2 |- |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E | | | | | | | | | | | | |- |Revenue Growth | | -9.1% |9.9% |15.4% |0.8% |4.3% |4.3% |4.3% |4.3% |4.3% | |Other Current Assets as a % of Revenue |8.74% |11.38% |11.70% |8.94% |10.35% |10.22% |10.22% |10.22% |10.22% |10.22% |- | | | | | | | | | | | | |Financial Liabilities, Current as a % of Revenue |4.6% |6.7% |0.0% |5.4% |5.3% |3.58% |3.58% |3.58% |3.58% |3.58% |- |COGS % of Revenue | -26.2% | -21.2% | -22.3% | -25.8% | -23.2% | -23.7% | -23.7% | -23.7% | -23.7% | -23.7% | |Provisions, Current as a % of Revenue |4.3% |4.1% |4.1% |3.4% |3.7% |3.91% |3.91% |3.91% |3.91% |3.91% |- |OE% of Revenue | -21.6% | -25.1% | -24.8% | -24.8% | -25.2% | -24.3% | -24.3% | -24.3% | -24.3% | -24.3% | |Defferred Liabilities, Current as a % of Revenue |0.0% |0.0% |0.0% |0.0% |0.0% |0.00% |0.00% |0.00% |0.00% |0.00% |- |SG&A % of Revenue | -26.0% | -26.9% | -23.9% | -21.7% | -21.3% | -24.0% | -24.0% | -24.0% | -24.0% | -24.0% | |Other Current Liabilities as a % of Revenue |0.0% |67.6% |69.3% |69.2% |82.7% |57.76% |57.76% |57.76% |57.76% |57.76% |- |Tax % of EBIT | -8.8% | -10.5% | -14.6% | -7.3% | -6.5% | -9.5% | -9.5% | -9.5% | -9.5% | -9.5% | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- !Fixed Assets Schedule | | | | | | | | | | | !Unlevered Free Cash Flow (mn) | | | | | | | | | | |- |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E | |Fiscal Year |1903A |1903A |1902A |1903A |1902A |2023E |2024E |2025E |2026E |2027E |- |Beginning PP&E | |8,920 |8,405 |8,682 |8,985 |10,144 |3,364 |3,397 |3,431 |3,465 | |Unlevered Free Cash Flow |8,244 |13,786 |3,767 |9,867 |10,610 |8,347 |6,926 |7,854 |8,195 |8,551 |- |D&A |1,609 |1,233 |1,324 |1,548 |1,523 |7,431 |183 |184 |186 |188 | | | | | | | | | | | | |- |CapEx |10,529 |718 |1,601 |1,851 |2,681 |651 |216 |218 |220 |222 | |Projection Year | | | | | |1 |2 |3 |4 |5 |- |Ending PP&E |8,920 |8,405 |8,682 |8,985 |10,144 |3,364 |3,397 |3,431 |3,465 |3,499 | |Present Value of Free Cash Flow | | | | | |8,930 |7,928 |9,617 |10,737 |11,986 |- | | | | | | | | | | | | | | | | | | | | | | | |- |Assumptions | | | | | | | | | | | ! colspan="2" |Implied Share Price Calculation | | ! colspan="7" |Sensitivity Table |- |Fiscal Year |2018A |2019A |2020A |2021A |2022A |2023E |2024E |2025E |2026E |2027E | |Sum of PV of FCF (5 year projected Assumption) | |49,198 | | | | | | | | |- |D&A as a % of Beginning PP&E (to revenue) | |5.5% |5.4% |5.5% |5.3% |5.4% |5.4% |5.4% |5.4% |5.4% | |Growth Rate | |3.57% | | | | colspan="5" |Growth Rate |- |CapEx as a % of Beginning PP&E (to revenue) | |3.2% |6.5% |6.5% |9.4% |6.4% |6.4% |6.4% |6.4% |6.4% | |WACC | |6.99% | | |530.15 |2.57% |3.07% |3.57% |4.07% |4.57% |- | | | | | | | | | | | | |Terminal Value | |259,198 | | rowspan="5" |WACC |5.99% |543.20 |483.96 |483.96 |543.20 |735.20 |- | | | | | | | | | | | | |PV of Terminal Value | |184,924 | |6.49% |631.11 |550.05 |550.05 |631.11 |920.11 |- | | | | | | | | | | | | |Enterprise Value | |234,122 | |6.99% |631.11 |550.05 |550.05 |631.11 |920.11 |- | | | | | | | | | | | | |(+) Cash | |2,212 | |7.49% |543.20 |483.96 |483.96 |543.20 |735.20 |- | | | | | | | | | | | | |(-) Debt | |16,239 | |7.99% |428.97 |393.81 |393.81 |428.97 |530.15 |- ! colspan="3" |Weighted Average Cost of Capital (WACC) | | | | | | | | | |(-) Minority Interest | | -6,498 | | | | | | | | |- |Market Cap (mn) | |525,970 | | | | | | | | | |Equity Value | |226,593 | | | | | | | | |- |Book value of debtDebt (mn) | |16,239 | | | | | | | | | |Diluted Shares Outstanding (mm) | |940.30 | | | | | | | | |- | | | | | | | | | | | | |Implied Share Price | |530.15 | | | | | | | | |- |Cost of Debt | |9.24% | | | | | | | | | |Current Price | |552.35 | | | | | | | | |- |Tax Rate (5 year average) | |19.64% | | | | | | | | | |Upside | | -4.02% | | | | | | | | |- |D/(D+E) | |2.99% | | | | | | | | | |Valuation | |FALSE | | | | | | | | |- |After Tax Cost of Debt | |7.43% | | | | | | | | | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- |Risk Free Rate (10-Yr Treasury Yield) | |4.19% | | | | | | | | | | | | | | | | | | | | |- | colspan="2" |S&P500 Market Return yearly for last 10 years 2012-2022 |13.79% | | | | | | | | | | | | | | | | | | | | |- |Market Risk Premium | |9.60% | | | | | | | | | | | | | | | | | | | | |- |Beta | |0.29 | | | | | | | | | | | | | | | | | | | | |- |E/(D+E) | |97.01% | | | | | | | | | | | | | | | | | | | | |- |Cost of Equity | |6.97% | | | | | | | | | | | | | | | | | | | | |- | | | | | | | | | | | | | | | | | | | | | | | |- |WACC | |6.99% | | | | | | | | | | | | | | | | | | | | |}
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