ITUB3.SA
ITAUUNIBANCOON EJ N1ClosedITUB3.SA discounted cash flow valuation
ITAUUNIBANCOON EJ N1 is a banks - regional company. Its cash flows include lending and deposits, so free cash flow isn't owner earnings and this model can mislead. Compare it with peers on book value and earnings instead.
ITUB3.SA Fair Value
Reverse DCF: today's price implies -12.3% a year of FCF growth for years 1–5, against 7.3% in this model.
Model: 7.3% from analyst next-year revenue growth. Fades linearly to terminal growth by year 10.
Model: 10.00% (CAPM, see the build-up).
Long-run growth after year 10; keep it at or below nominal GDP.
Value Bridge
| PV of free cash flow, years 1–10 | BRL 1.27T |
|---|---|
| PV of terminal value (54% of EV) | BRL 1.52T |
| Enterprise value | BRL 2.79T |
| + Cash & investments | BRL 484.16B |
| − Total debt | −BRL 1.12T |
| Equity value | BRL 2.16T |
| ÷ Shares outstanding | 5.62B |
| Value per share | BRL 384.70 |
| Market cap | BRL 583.51B |
Discount Rate Build-up
| Risk-free rate (10-yr Treasury) | 5.19% |
|---|---|
| Beta (adjusted toward 1) | 0.67 |
| Equity risk premium | 4.50% |
| Cost of equity (CAPM) | 8.18% |
| Pre-tax cost of debt | 12.00% |
| Tax rate | 8.8% |
| Debt / (equity + debt) | 65.7% |
| WACC | 10.00% |
Beta is Yahoo's, held between 0.5 and 2.5, then moved a third of the way toward 1. Cost of debt is interest expense ÷ total debt, held between the risk-free rate and 12%. WACC is at least the risk-free rate plus 2%.
Free Cash Flow: History and Projection
Sensitivity: Value per Share
| WACC ↓ / g → | 2.00% | 2.50% | 3.00% | 3.50% | 4.00% |
|---|---|---|---|---|---|
| 8.00% | 500.42 | 542.09 | 592.08 | 653.17 | 729.51 |
| 9.00% | 409.02 | 437.64 | 471.02 | 510.45 | 557.75 |
| 10.00% | 340.65 | 361.21 | 384.70 | 411.79 | 443.40 |
| 11.00% | 287.61 | 302.90 | 320.09 | 339.57 | 361.82 |
| 12.00% | 245.29 | 256.98 | 269.95 | 284.44 | 300.74 |
Green is above today's price, red below (full colour at ±30%). The outlined centre cell is the current inputs.
Projected Cash Flows
| Year | Growth | Free cash flow | Discount factor | Present value |
|---|---|---|---|---|
| Base (TTM) | — | BRL 149.47B | — | — |
| Year 1 | 7.3% | BRL 160.38B | 0.909 | BRL 145.80B |
| Year 2 | 7.3% | BRL 172.09B | 0.826 | BRL 142.22B |
| Year 3 | 7.3% | BRL 184.65B | 0.751 | BRL 138.73B |
| Year 4 | 7.3% | BRL 198.13B | 0.683 | BRL 135.33B |
| Year 5 | 7.3% | BRL 212.60B | 0.621 | BRL 132.01B |
| Year 6 | 6.4% | BRL 226.29B | 0.564 | BRL 127.73B |
| Year 7 | 5.6% | BRL 238.91B | 0.513 | BRL 122.60B |
| Year 8 | 4.7% | BRL 250.19B | 0.467 | BRL 116.72B |
| Year 9 | 3.9% | BRL 259.85B | 0.424 | BRL 110.20B |
| Year 10 | 3.0% | BRL 267.64B | 0.386 | BRL 103.19B |
Method
Two-stage free-cash-flow model, the same as the bot's lgf dcf: five years at the chosen growth rate, a straight-line fade to terminal growth by year ten, then a Gordon-growth terminal value. Everything is discounted at WACC.
Base cash flow is the trailing four quarters of operating cash flow minus capital expenditure (the latest fiscal year when quarters are missing). Default growth uses analyst long-term growth when Yahoo publishes it, else next year's revenue growth (steadier than one year's EPS), else next year's EPS growth, else revenue CAGR, held between −2% and 25%. Terminal growth defaults to 3%.
A DCF is only as good as its inputs. The terminal value is usually most of the answer, so read the sensitivity grid before the headline number. This is a model, not investment advice.