Are RBC Bearings Incorporated (NYSE:RBC) Investors Paying Above The Intrinsic Value?

Simply Wall St.09-16

Key Insights Using the 2 Stage Free Cash Flow to Equity, RBC Bearings fair value estimate is US$233 RBC Bearings' US$287 share price signals that it might be 24% overvalued Analyst price target...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2467848278?lang=en_US&edition=fundamental","thumbnail":"https://s.yimg.com/uu/api/res/1.2/q0yRN_h1fYD6SjjSkWx5lg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/4afa9747177650711578ccd57242a6b7","is_english":true,"pubTime":"2024-09-16 21:03","share_image_url":"https://static.laohu8.com/5f26f4a48f9cb3e29be4d71d3ba8c038","id":"2467848278","market":"us","top_or_hot":-1,"title":"Are RBC Bearings Incorporated (NYSE:RBC) Investors Paying Above The Intrinsic Value?","media":"Simply Wall St.","content":"<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, RBC Bearings fair value estimate is US$233 \n RBC Bearings' US$287 share price signals that it might be 24% overvalued \n  Analyst price target...</p>\n\n<a href=\"https://finance.yahoo.com/news/rbc-bearings-incorporated-nyse-rbc-130358997.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Are RBC Bearings Incorporated (NYSE:RBC) Investors Paying Above The Intrinsic Value?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAre RBC Bearings Incorporated (NYSE:RBC) Investors Paying Above The Intrinsic Value?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-16 21:03 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/rbc-bearings-incorporated-nyse-rbc-130358997.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, RBC Bearings fair value estimate is US$233 \n RBC Bearings' US$287 share price signals that it might be 24% overvalued \n  Analyst price target...</p>\n\n<a href=\"https://finance.yahoo.com/news/rbc-bearings-incorporated-nyse-rbc-130358997.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"TV","symbol_name":"墨西哥电视","start_time":0,"source_url":"https://finance.yahoo.com/news/rbc-bearings-incorporated-nyse-rbc-130358997.html","article_id":"2467848278","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/q0yRN_h1fYD6SjjSkWx5lg--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/4afa9747177650711578ccd57242a6b7"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2467848278","pubTimestamp":1726491838,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Using the 2 Stage Free Cash Flow to Equity, RBC Bearings fair value estimate is US$233. RBC Bearings' US$287 share price signals that it might be 24% overvalued. Analyst price target for RBC is US$305, which is 31% above our fair value estimate. In this article we are going to estimate the intrinsic value of RBC Bearings Incorporated  by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow  model. Believe it or not, it's not too difficult to follow, as you'll see from our example!We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"TV":"墨西哥电视","BK4100":"有线和卫星","ISBC":"投资者银行","BK4211":"区域性银行","IE00BLDYK493.USD":"NEUBERGER BERMAN US SMALL CAP \"A\" (USD) INC","BK4161":"工业机械","DCF":"Dreyfus Alcentra Global Credit Income 2024 Target Term Fund, Inc","RBC":"RBC轴承","LU2065731478.USD":"ALLSPRING (LUX) WORLDWIDE FUND - SMALL CAP INNOVA \"I\" (USD) ACC","RBCP":"RBC Bearings, Inc.","FCF":"第一联邦金融","NYSE":"纽交所","IE00B64QTZ34.USD":"NEUBERGER BERMAN US SMALL CAP \"A\" (USD) ACC"},"translate_title":"RBC轴承公司（纽约证券交易所股票代码：RBC）投资者支付的费用是否高于内在价值？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DCF":1,"FCF":1,"ISBC":1,"NYSE":1,"RBC":1,"TV":1,"RBCP":0.9},"content_text":"Key Insights\n\n Using the 2 Stage Free Cash Flow to Equity, RBC Bearings fair value estimate is US$233 \n RBC Bearings' US$287 share price signals that it might be 24% overvalued \n  Analyst price target for RBC is US$305, which is 31% above our fair value estimate \n\n In this article we are going to estimate the intrinsic value of RBC Bearings Incorporated (NYSE:RBC) by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example! \n We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. \n View our latest analysis for RBC Bearings \n Is RBC Bearings Fairly Valued? \n We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. \n A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, and so the sum of these future cash flows is then discounted to today's value: \n 10-year free cash flow (FCF) forecast \n\n\n\n\n2025\n2026\n2027\n2028\n2029\n2030\n2031\n2032\n2033\n2034\n\n\n Levered FCF ($, Millions) \nUS$321.6m\nUS$319.2m\nUS$320.1m\nUS$323.1m\nUS$327.7m\nUS$333.4m\nUS$340.0m\nUS$347.2m\nUS$355.0m\nUS$363.2m\n\n\nGrowth Rate Estimate Source\nAnalyst x1\nAnalyst x2\nEst @ 0.28%\nEst @ 0.95%\nEst @ 1.41%\nEst @ 1.74%\nEst @ 1.97%\nEst @ 2.13%\nEst @ 2.24%\nEst @ 2.32%\n\n\n Present Value ($, Millions) Discounted @ 6.9% \nUS$301\nUS$280\nUS$262\nUS$248\nUS$235\nUS$224\nUS$214\nUS$204\nUS$195\nUS$187\n\n\n\n(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$2.4b\n The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.5%. We discount the terminal cash flows to today's value at a cost of equity of 6.9%. \nTerminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$363m× (1 + 2.5%) ÷ (6.9%– 2.5%) = US$8.6b\nPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= US$8.6b÷ ( 1 + 6.9%)10= US$4.4b\n The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$6.8b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$287, the company appears slightly overvalued at the time of writing. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. \n\n\n\n  NYSE:RBC Discounted Cash Flow September 16th 2024\n \n\n Important Assumptions \n The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at RBC Bearings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.9%, which is based on a levered beta of 1.057. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. \nSWOT Analysis for RBC Bearings\n\n\nStrength\n\nEarnings growth over the past year exceeded the industry.\n\n\nDebt is not viewed as a risk.\n\n\nBalance sheet summary for RBC.\n\n\n\nWeakness\n\nExpensive based on P/E ratio and estimated fair value.\n\n\n\nOpportunity\n\nAnnual earnings are forecast to grow faster than the American market.\n\n\n\nThreat\n\nAnnual revenue is forecast to grow slower than the American market.\n\n\nWhat else are analysts forecasting for RBC?\n\n\n\n Next Steps: \n Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. What is the reason for the share price exceeding the intrinsic value? For RBC Bearings, we've put together three pertinent elements you should assess: \n\n Risks: Case in point, we've spotted   1 warning sign for RBC Bearings  you should be aware of. \n Future Earnings: How does RBC'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 free analyst growth expectation chart. \n Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! \n\n PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.27.0","shortVersion":"4.27.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2467848278"}