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EasyJet plc
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===Discounted Cash Flow Model=== {| class="wikitable" | colspan="15" |Current Share Price: £4.46 |- !''£ million'' ! colspan="9" |''Historical'' ! colspan="5" |''Projected'' |- ! !2014 !2015 !2016 !2017 !2018 !2019 !2020 !2021 !2022 !2023 !2024 !2025 !2026 !2027 |- ! colspan="15" |Income Statement |- |Revenue |4527 |4686 |4669 |5047 |5898 |6385 |3009 |1458 |5769 |8192 |9175 |9726 |10212 |11029 |- |''% growth'' | |4% |0% |8% |17% |8% | -53% | -52% |296% |42% |12% |6% |5% |8% |- | | | | | | | | | | | | | | | |- |Cost Of Goods Sold |3480 |3474 |3595 |3931 |4462 |4836 |2773 |1641 |4404 |6243 |6993 |7412 |7783 |8405 |- |''% of revenue'' |77% |74% |77% |78% |76% |76% |92% |113% |76% |76% |76% |76% |76% |76% |- | | | | | | | | | | | | | | | |- |Gross Profit |1047 |1212 |1074 |1116 |1436 |1549 |236 | -183 |1365 |1949 |2182 |2313 |2429 |2623 |- | | | | | | | | | | | | | | | |- |Selling General & Admin Exp. |103 |102 |107 |122 |143 |157 |107 |60 |173 |192 |215 |228 |239 |258 |- |''% of revenue'' |2% |2% |2% |2% |2% |2% |4% |4% |3% |2% |2% |2% |2% |2% |- | | | | | | | | | | | | | | | |- |Depreciation & Amort. |106 |125 |157 |181 |199 |484 |485 |456 |539 |313 |350 |371 |390 |421 |- |''% of revenue'' |2% |3% |3% |4% |3% |8% |16% |31% |9% |4% |4% |4% |4% |4% |- | | | | | | | | | | | | | | | |- |Amort. of Goodwill and Intangibles |12 |13 |12 |14 |15 |15 |18 |24 |25 |21 |24 |25 |27 |29 |- |''% of revenue'' |0.3% |0.3% |0.3% |0.3% |0.3% |0.2% |0.6% |1.6% |0.4% |0.3% |0.3% |0.3% |0.3% |0.3% |- | | | | | | | | | | | | | | | |- |Other Operating Expense/(Income) |243 |275 |291 |367 |490 |427 |373 |283 |637 |543 |608 |644 |676 |730 |- |% of revenue |5% |6% |6% |7% |8% |7% |12% |19% |11% |7% |7% |7% |7% |7% |- | | | | | | | | | | | | | | | |- |Total Operating Expenses |464 |515 |567 |684 |847 |1083 |983 |823 |1374 |1068 |1197 |1269 |1332 |1438 |- | | | | | | | | | | | | | | | |- |Operating Income/ EBIT |583 |697 |507 |432 |589 |466 | -747 | -1006 | -9 |880 |986 |1045 |1097 |1185 |- | | | | | | | | | | | | | | | |- |EBITDA |690 |822 |664 |613 |788 |703 | -491 | -772 |255 |1193 |1336 |1416 |1487 |1606 |- | | | | | | | | | | | | | | | |- |Tax Expense |131 |138 |70 |80 |87 |81 | -194 | -178 | -39 |157 |175 |186 |195 |211 |- |''Effective tax rate'' |22% |20% |14% |19% |15% |17% |26% |18% |433% |18% |18% |18% |18% |18% |- | | | | | | | | | | | | | | | |- |EBIAT |452 |559 |437 |352 |502 |385 | -553 | -828 |30 |723 |810 |859 |902 |974 |- | | | | | | | | | | | | | | | |- ! colspan="15" |Cashflow |- |D&A |106 |125 |157 |181 |199 |484 |485 |456 |539 |313 |350 |371 |390 |421 |- |''% of revenue'' |2% |3% |3% |4% |3% |8% |16% |31% |9% |4% |4% |4% |4% |4% |- | | | | | | | | | | | | | | | |- |Capital Expenditure | -426 | -509 | -549 | -586 | -931 | -954 | -659 | -140 | -501 | -1015 | -1137 | -1205 | -1266 | -1367 |- |''% of revenue'' |9% |11% |12% |12% |16% |15% |22% |10% |9% |12% |12% |12% |12% |12% |- | | | | | | | | | | | | | | | |- |Change in NWC |28 | -193 |242 | -252 | -169 | -481 | -462 |809 | -146 | -187 | -210 | -222 | -233 | -252 |- |% of revenue |1% | -4% |5% | -5% | -3% | -8% | -15% |55% | -3% | -2% | -2% | -2% | -2% | -2% |- | | | | | | | | | | | | | | | |- |'''<u>Unlevered FCF</u>''' | |104 |368 | -197 |199 | -61 |396 | -265 | -1321 |'''214''' |'''208''' |'''233''' |'''247''' |'''259''' |} {| class="wikitable" !WACC ! !Notes |- |'''Weights''' | | |- |Total Debt |3642 | |- |Market Cap |3410 | |- |Total |7052 | |- |Wd |52% |Weight of debt calculated as the total debt as a proportion of total capital. |- |We |48% |Weight of equity calculated as the market cap as a proportion of total capital |- | | | |- |'''Debt''' | | |- |Total Debt |3642 |Cost of debt was calculated by taking interest expenses from the income statement and dividing this by the total debt making note of the fact that debt is a tax deductable item. |- |Interest Expense | -177 | |- |Rate |5% | |- |Effective Tax Rate |18% | |- |Rd(1-t) |4.0% | |- | | | |- |'''Equity''' | | |- |Risk Free Rate |3.9% |Capital asset pricing model was used to calculate the cost of equity. Risk free rate of the UK Gilt Yield was used. |- |Beta |2.5 |Beta for the stock was found from Yahoo Finance<ref>https://uk.finance.yahoo.com/</ref> |- |Market Rate |10% |Current market rate was calculated as the average returns of the S&P 500 over the past 50 years. |- |Re |19.1% | |- | | | |- |'''<u>Discount Rate</u>''' |'''11.32%''' | |- |'''<u>Perpetuity Growth Rate</u>''' |'''2.0%''' |A perpetuity growth rate of 2% was used as this is sufficiently low to ensure that the company is not projected to increase in size far faster than the global economy in the very long term. |} {| class="wikitable" !DCF ! !2023 !2024 !2025 !2026 !2027 !Terminal Value (Perpetuity Growth) !Notes |- | colspan="8" |'''''£ million''''' | |- |FCF | | 214.0 | 208.1 | 233.1 | 247.0 | 259.4 | 2,840.1 |The terminal value of the company was calculated using the Gordon Growth Model<ref>https://einvestingforbeginners.com/terminal-value-gordon-growth-model-daah/</ref>. |- |PV of FCF |841.81 | colspan="7" rowspan="10" | |- |Terminal Value | 2,840.11 |- |NPV of TV |1661.67 |- |Enterprise Value |2503.48 |- |Net Debt | -1163 |- |Equity Value |3666.5 |- |Shares Out |758 |- |'''<u>Equity Value per Share</u>''' |'''£4.84''' |- |<u>'''Current share price'''</u> |'''£4.46''' |- |''Difference'' |8.5% |}
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