An Intrinsic Calculation For GE HealthCare Technologies Inc. (NASDAQ:GEHC) Suggests It’s 36% Undervalued

An Intrinsic Calculation For GE HealthCare Technologies Inc. (NASDAQ:GEHC) Suggests It’s 36% Undervalued

  • GE HealthCare Technologies’ estimated fair value is US$125 based on 2 Stage Free Cash Flow to Equity

  • Current share price of US$80.29 suggests GE HealthCare Technologies is potentially 36% undervalued

  • Analyst price target for GEHC is US$96.55 which is 23% below our fair value estimate

Does the December share price for GE HealthCare Technologies Inc. (NASDAQ:GEHC) reflect what it’s really worth? Today, we will estimate the stock’s intrinsic value by projecting its future cash flows and then discounting them to today’s value. We will use the Discounted Cash Flow (DCF) model on this occasion. Before you think you won’t be able to understand it, just read on! It’s actually much less complex than you’d imagine.

Remember though, that there are many ways to estimate a company’s value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.

View our latest analysis for GE HealthCare Technologies

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. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, and so the sum of these future cash flows is then discounted to today’s value:

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

Levered FCF ($, Millions)

US$2.19b

US$2.29b

US$2.35b

US$2.62b

US$2.74b

US$2.85b

US$2.96b

US$3.06b

US$3.15b

US$3.25b

Growth Rate Estimate Source

Analyst x6

Analyst x5

Analyst x2

Analyst x1

Est @ 4.74%

Est @ 4.11%

Est @ 3.66%

Est @ 3.35%

Est @ 3.13%

Est @ 2.98%

Present Value ($, Millions) Discounted @ 7.0%

US$2.0k

US$2.0k

US$1.9k

US$2.0k

US$2.0k

US$1.9k

US$1.8k

US$1.8k

US$1.7k

US$1.6k

(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$19b

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