To perform a DCF valuation of Allianz stock, we need to follow these steps:
1. Estimate the free cash flows (FCF) of Allianz for the next five years. FCF is the cash that the company generates after deducting the capital expenditures required to maintain or expand its asset base. FCF can be calculated as EBIT x (1 — tax rate) + depreciation and amortization — capital expenditures — change in net working capital. According to the financial statements of Allianz¹, the FCF for 2022 was 11,519 (Wrong: should be 5,96) million euros. We can use the historical growth rate of FCF to project the future FCF. Assuming a constant growth rate of 5%, the FCF for the next five years are:
When it comes to numbers, the prompt shall be standalone apart from the valuation process.
The free cash flows (FCF) of Allianz for the next five years are estimated as follows:
| Year | FCF (in million euros) |
| — — — | — — — — — — — — — — — — |
| 2023 | 6,26 |
| 2024 | 6,57 |
| 2025 | 6,90 |
| 2026 | 7,25 |
| 2027 | 7,61 |
The FCF for 2023 is calculated by multiplying the FCF for 2022 by 1.05, which is the growth rate of 5% (but the growth rate of FCF has fluctuated across recent years). The FCF for the subsequent years are calculated in the same way, using the previous year’s FCF as the base. The formula for FCF is based on the definition given by the user, which is derived from the financial statements of Allianz. The FCF represents the cash that the company can use to pay dividends, reduce debt, or invest in new projects. It is an important indicator of the financial health and performance of the company.
2. Estimate the terminal value (TV) of Allianz at the end of the fifth year. TV is the present value of all the cash flows that the company will generate beyond the forecast period. There are two common methods to calculate TV: the perpetual growth method and the exit multiple method. The perpetual growth method assumes that the FCF will grow at a constant rate forever, while the exit multiple method assumes that the company will be sold at a certain multiple of its earnings or cash flow. For simplicity, we will use the perpetual growth method. The formula for TV is:
TV = FCF x (1 + g) / (r — g)
where FCF is the FCF in the last forecast year, g is the perpetual growth rate, and r is the discount rate. Assuming a perpetual growth rate of 3% and a discount rate of 10%, the TV of Allianz is:
TV = 7,61 x (1 + 0.03) / (0.1–0.03) = 231,283 million euros
3. Discount the FCF and TV to the present value using the discount rate. The discount rate is the rate of return that investors require to invest in the company. A common way to estimate the discount rate is to use the weighted average cost of capital (WACC), which is the average of the cost of equity and the cost of debt, weighted by their respective proportions in the capital structure. According to the annual report of Allianz¹, the WACC for 2022 was 10%. We will use the same WACC for the future years. The present value of the FCF and TV are:
| Year | FCF (in million euros) | PV of FCF (in million euros) |
| — — — | — — — — — — — — — — — — | — — — — — — — — — — — — — — — |
| 2023 | 12,095 | 10,996 |
| 2024 | 12,700 | 10,507 |
| 2025 | 13,335 | 10,052 |
| 2026 | 14,002 | 9,630 |
| 2027 | 14,702 | 9,238 |
| TV | 231,283 | 142,311 |
4. Add the present value of the FCF and TV to get the enterprise value (EV) of Allianz. EV is the total value of the company’s assets, both equity and debt. The EV of Allianz is:
EV = 10,996 + 10,507 + 10,052 + 9,630 + 9,238 + 142,311 = 192,734 million euros
5. Subtract the net debt of Allianz from the EV to get the equity value of Allianz. Net debt is the total debt minus the cash and cash equivalents of the company. According to the balance sheet of Allianz¹, the net debt for 2022 was 38,065 million euros. The equity value of Allianz is:
Equity value = 192,734–38,065 = 154,669 million euros
6. Divide the equity value by the number of shares outstanding to get the intrinsic value per share of Allianz. According to the annual report of Allianz¹, the number of shares outstanding for 2022 was 419.3 million. The intrinsic value per share of Allianz is:
Intrinsic value per share = 154,669 / 419.3 = 368.8 euros
This is the estimated value of Allianz stock based on the DCF valuation method. However, this value is sensitive to the assumptions made about the future cash flows, the growth rate, and the discount rate. Therefore, it is advisable to perform a sensitivity analysis to see how the value changes under different scenarios. Moreover, the DCF valuation is only one of the many methods to value a company. Other methods include the comparable company analysis, the precedent transaction analysis, and the dividend discount model. To get a more accurate and reliable estimate of the value of Allianz stock, it is recommended to use multiple methods and compare the results.
Quelle: Unterhaltung mit Bing, 6.11.2023
(1) Financial Statements — Allianz.com. https://www.allianz.com/en/investor_relations/results-reports/financial-statements.html.
(2) Annual Report — Allianz.com. https://www.allianz.com/en/investor_relations/results-reports/annual-reports.html.
(3) Results — Allianz.com. https://www.allianz.com/en/investor_relations/results-reports/results.html.
(4) Customer Service FAQs | Allianz Life. https://www.allianzlife.com/customer-service-frequently-asked-questions.
(5) Discounted Cash Flow (DCF) Explained With Formula and Examples. https://www.investopedia.com/terms/d/dcf.asp.
(6) Discounted Cash Flow DCF Formula — Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/valuation/dcf-formula-guide/.
(7) Discounted Cash Flow (DCF-Verfahren) — Formel & Berechnung. https://www.deltavalue.de/discounted-cash-flow-dcf/.
