The calculations below outline how an intrinsic value for Severn Trent is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
See our documentation to learn about this calculation.
|Levered FCF (GBP, Millions)||£126.00||£77.50||£125.00||£257.00||£256.76|
|Source||Analyst x3||Analyst x2||Analyst x2||Analyst x1||Extrapolated @ (-0.09%)|
Discounted (@ 8.3%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = £257 × (1 + 1.5%) ÷ (8.3% – 1.5%)
Terminal value based on the Perpetuity Method where growth (g) = 1.5%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding (£3,209 / 233)
Value per share:
Current discount (share price of £23.43): -70%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 8.3% = 1.49% + (0.8 * 8.51%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.645 = 0.378 (1 + (1- 21%) (89.29%))
Levered Beta used in calculation = 0.8
Are Severn Trent's annual earnings growth expected to exceed 2.1% over the next 3 years?
Ms. Olivia Garfield, also known as Liv, BA (Hons), has been the Chief Executive Officer of Severn Trent Plc since April 11, 2014 and Severn Trent Water Ltd. since April 11, 2014. Ms. Garfield has been Executive Director of Severn Trent Plc since April 11, 2014. She served as the Chief Executive of Openreach at BT Group plc from April 1, 2011 to February 2014. Her task is to build on the foundations laid by Robertson. She carried out a range of senior strategic and operational roles, including Group Director Strategy, Portfolio and Regulation, Managing Director Commercial and Brands, Global Services and Vice President UK Customer Services, Global Services. Ms. Garfield served as Group Director of Strategy and Regulatory Affairs at BT Group plc. She oversaw BT Group's fibre broadband strategy and other key areas. She oversaw delivery of fibre to two thirds of UK homes and businesses. From 1998 to 2002, she served for Accenture as a consultant in the Communications and High Tech Market Unit, designing and implementing business change solutions across a number of industry sectors. She has been a Director of Dee Valley Group plc since February 2017 and Severn Trent Water Ltd. since April 11, 2014. She served as a Non Executive Director of Tesco PLC since April 1, 2013 until February 28, 2015. Ms. Garfield holds MA (Hons) degree from New Hall College, Cambridge.
Average tenure of the Severn Trent management team:
Average tenure of the Severn Trent board of directors:
Severn Trent Plc operates as a water and sewerage company in the United Kingdom, the United States, and internationally. The company operates through two segments, Regulated Water and Waste Water, and Business Services. The Regulated Water and Waste Water segment provides water and sewerage services to approximately 4.3 million households and businesses in the Midlands and mid-Wales. The Business Services segment provides contract services to municipal and industrial clients and the UK Ministry of Defence for the design, build, and operation of water and waste water treatment facilities and networks, as well as to businesses. It also offers contract services to community, municipal, and industrial clients for the operation and maintenance of water and waste water treatment facilities and networks in the United States; and generates renewable energy from wind turbines, anaerobic digestion, hydropower, and solar technology. Severn Trent Plc was founded in 1974 and is headquartered in Coventry, the United Kingdom.
|Name:||Severn Trent Plc|
|Market Cap:||£5,469 million|
Severn Trent Centre, Coventry, CV1 2LZ, United Kingdom