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Bic Stock Price
Estimating The Fair Value Of Société BIC SA (EPA:BB)
In this article I am going to calculate the intrinsic value of Société BIC SA (
)by taking the expected future cash flows and discounting them to today’s value.I will use theDiscounted Cash Flows (DCF)model.Don’t get put off by the jargon, the math behind it is actually quite straightforward.Anyone interested in learning a bit more about intrinsic value should have a read of the
.Please also note that this article was written in July 2018 so be sure check out the updated calculation by following the link below.
We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period.In the first stage we need to estimate the cash flows to the business over the next five years.Where possible I use analyst estimates, but when these aren’t available I have extrapolated the previous free cash flow (FCF) from the year before. For this growth rate I used the average annual growth rate over the past five years, but capped at a reasonable level.I then discount this to its value today and sum up the total to get the present value of these cash flows.
We now need to calculate the Terminal Value, which accounts for all the future cash flows after the five years.The Gordon Growth formula is used to calculate Terminal Value at an annual growth rate equal to the 10-year government bond rate of 0.8%. We discount this to today’s value at a cost of equity of 8.2%.
× (1 + g) ÷ (r – g)= €244.02m× (1 + 0.8%)÷ (8.2%– 0.8%)= €3.33b
The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value,which in this case is €3.15b.To get the intrinsic value per share, we divide this by the total number of shares outstanding, or the equivalent number if this is a depositary receipt or ADR.
.Relativeto the current share price of €81.65, the stock isfair value, maybe slightly overvaluedand not available at a discount at this time.
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.If you don’t agree with my result, have a go at the calculation yourself and play with the assumptions.Because we are looking at Société BIC as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighed average cost of capital, WACC) which accounts for debt.In this calculation I’ve used 8.2%, which is based on a levered beta of 0.800. This is derived from the Bottom-Up Beta method based on comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
Although the valuation of a company is important, itshouldn’t be the only metric you look at when researching a company.For BB,there arethreepertinentfactorsyou shouldfurther research:
: Does BB have a healthy balance sheet? Take a look at our
: How does BB’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our
: Are there other high quality stocks you could be holding instead of BB? Explore
to get an idea of what else is out there you may be missing! Bic Stock Price
PS. Simply Wall St does a DCF calculation for every FR stock every 6 hours, so if you want to find the intrinsic value of any other stock just
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
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