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EQS Group
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=== DCF also points to value above current price === Management has outlined its views on the medium-term revenue growth outlook, with Compliance growing at a CAGR of 34% from FY21 through to FY25 and IR growing at a more modest 13%. From the current mix (and assuming no further M&A), this equates to group revenue growth of 27%. On the basis of this forecast, management anticipates EBITDA margins exceeding 30% by the end of the forecast period. In view of the rising interest rates globally, and not for any company-specific reasons, Edison Investment Research has increased the WACC at which Edison Investment Research calculates the DCF from 8% to 9%. If Edison Investment Research applies these assumptions to the DCF, assume that margins are sustainable at that level and that growth tails off by 200bp per year beyond FY25e simply through scale, then at a WACC of 9% and a terminal growth rate of 2%, the implied value per share is β¬47.66. In April, at the lower WACC, Edison Investment Research derived a figure of β¬57.93. Obviously, there is an element of execution risk here, with the bulk of the value accruing well beyond Edison's explicit forecast period (to FY23e). {| class="wikitable" |+Exhibit 7: DCF varying WACC, terminal growth using management mid-term assumptions<ref>Source: Edison Investment Research.</ref> | | | colspan="5" |Terminal growth rate |- | | |0.00% |1.00% |2.00% |3.00% |4.00% |- | rowspan="10" |WACC |12.50% |25.28 |26.49 |27.93 |29.68 |31.84 |- |12.00% |26.83 |28.21 |29.86 |31.89 |34.41 |- |11.50% |28.53 |30.11 |32.01 |34.36 |37.34 |- |11.00% |30.41 |32.21 |34.41 |37.17 |40.71 |- |10.50% |32.47 |34.55 |37.11 |40.36 |44.61 |- |10.00% |34.76 |37.17 |40.17 |44.03 |49.18 |- |9.50% |37.32 |40.11 |43.66 |48.29 |54.61 |- |9.00% |40.17 |43.45 |47.66 |53.28 |61.14 |- |8.50% |43.39 |47.26 |52.31 |59.21 |69.17 |- |8.00% |47.03 |51.63 |57.77 |66.36 |79.24 |}
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