Bank of Montreal (BMO.TO) Discounted Future Market Cap

Bank of Montreal

BMO.TO (TSX)

Valuation
Bank of Montreal Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("ratio:priceEarningsRatio"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

data.set_default_range(f"{-assumptions.get('historical_years')}->0")

assumptions.set("%net_income_margin", data.average(f"%netMargin"))
assumptions.set_bounds(
    "%net_income_margin", low=0, high="100%"
)

assumptions.set("%revenue_growth_rate", data.average(f"%revenueGrowthRate"))
assumptions.set_bounds(
    "%revenue_growth_rate", low=0, high="25%"
)

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"""
        income:revenue:-1 * 
        (1 + {assumptions.get('%revenue_growth_rate')})
    """,
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("income:revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("profile:price"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

CAD

Market Price CAD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	585 CAD
Estimated net income	42.35 Bil. CAD
Estimated market capitalization	654.3 Bil. CAD
Market capitalization discounted to present	417.3 Bil. CAD
Shares Outstanding	713.3 Mil.
Earnings Per Share (EPS)	11.47 CAD
Market Price	188.6 CAD
Price to Earnings (PE) Ratio	15.45

Historical and forecasted data

Monetary values in CAD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "timeseries": "annual", "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [{"l": "2016", "x": "2016-10-31", "y": 20947000000}, {"l": "2017", "x": "2017-10-31", "y": 21874000000}, {"l": "2018", "x": "2018-10-31", "y": 22870000000}, {"l": "2019", "x": "2019-10-31", "y": 25332000000}, {"l": "2020", "x": "2020-10-31", "y": 22233000000}, {"l": "2021", "x": "2021-10-31", "y": 26909000000}, {"l": "2022", "x": "2022-10-31", "y": 26259000000}, {"l": "2023", "x": "2023-10-31", "y": 29021000000}, {"l": "2024", "x": "2024-10-31", "y": 78558000000}, {"l": "2025", "x": "2025-10-31", "y": 78149000000}, {"l": "2026", "x": "2026-10-31", "y": 93497463600, "oy": 93497463600, "e": true, "d": 2026, "g": 19.64, "og": 19.64}, {"l": "2027", "x": "2027-10-31", "y": 111860365451, "oy": 111860365451, "e": true, "d": 2027, "g": 19.64, "og": 19.64}, {"l": "2028", "x": "2028-10-31", "y": 133829741225, "oy": 133829741225, "e": true, "d": 2028, "g": 19.64, "og": 19.64}, {"l": "2029", "x": "2029-10-31", "y": 160113902402, "oy": 160113902402, "e": true, "d": 2029, "g": 19.64, "og": 19.64}, {"l": "2030", "x": "2030-10-31", "y": 191560272834, "oy": 191560272834, "e": true, "d": 2030, "g": 19.64, "og": 19.64}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [{"l": "2016", "x": "2016-10-31", "y": 4622000000}, {"l": "2017", "x": "2017-10-31", "y": 5348000000}, {"l": "2018", "x": "2018-10-31", "y": 5450000000}, {"l": "2019", "x": "2019-10-31", "y": 5758000000}, {"l": "2020", "x": "2020-10-31", "y": 5097000000}, {"l": "2021", "x": "2021-10-31", "y": 7754000000}, {"l": "2022", "x": "2022-10-31", "y": 13537000000}, {"l": "2023", "x": "2023-10-31", "y": 4425000000}, {"l": "2024", "x": "2024-10-31", "y": 7318000000}, {"l": "2025", "x": "2025-10-31", "y": 8709000000}, {"l": "2026", "x": "2026-10-31", "y": 20672289201, "oy": 20672289201, "e": true, "d": 2026, "g": 137.4, "og": 137.4}, {"l": "2027", "x": "2027-10-31", "y": 24732326801, "oy": 24732326801, "e": true, "d": 2027, "g": 19.64, "og": 19.64}, {"l": "2028", "x": "2028-10-31", "y": 29589755784, "oy": 29589755784, "e": true, "d": 2028, "g": 19.64, "og": 19.64}, {"l": "2029", "x": "2029-10-31", "y": 35401183821, "oy": 35401183821, "e": true, "d": 2029, "g": 19.64, "og": 19.64}, {"l": "2030", "x": "2030-10-31", "y": 42353976323, "oy": 42353976323, "e": true, "d": 2030, "g": 19.64, "og": 19.64}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}], "editableDates": {"2026-10-31": 33, "2027-10-31": 34, "2028-10-31": 35, "2029-10-31": 36, "2030-10-31": 37}, "properties": {"display_table": true}, "width": "full"}

Edit Chart Values	2026-10-31	2027-10-31	2028-10-31	2029-10-31	2030-10-31

↳ Growth Rate

Estimated Future Values

Monetary values in CAD amounts except #	2025 Oct 31	LTM Jan 23	2026 Oct 31	2027 Oct 31	2028 Oct 31	2029 Oct 31	2030 Oct 31
Revenue	78,149	78,149	93,497	111,860	133,830	160,114	191,560
Revenue Growth Rate	-0.521%	0%	19.64%	19.64%	19.64%	19.64%	19.64%
Net Income	8,709	8,709	20,672	24,732	29,590	35,401	42,354

Monetary values in CAD

amounts except #

2025
Oct 31

LTM
Jan 23

2026
Oct 31

2027
Oct 31

2028
Oct 31

2029
Oct 31

2030
Oct 31

Revenue

78,149

93,497

111,860

133,830

160,114

191,560

Revenue Growth Rate

-0.521%

19.64%

Net Income

8,709

20,672

24,732

29,590

35,401

42,354

Historical Values

Monetary values in CAD amounts except #	Average	LTM Jan 23	2025 Oct 31	2024 Oct 31	2023 Oct 31	2022 Oct 31	2021 Oct 31	2020 Oct 31	2019 Oct 31	2018 Oct 31	2017 Oct 31	2016 Oct 31
Revenue	39,118	78,149	78,149	78,558	29,021	26,259	26,909	22,233	25,332	22,870	21,874	20,947
Cost of Revenue	12,874	45,667	45,667	50,278	0	0	0	0	0	0	0	0
Gross Profit	26,526	32,482	32,482	28,280	29,642	25,946	26,909	25,025	25,332	22,870	21,874	20,947
Gross Margin	84.78%	41.56%	41.56%	36%	102.1%	98.81%	100%	112.6%	100%	100%	100%	100%
Operating Income	11,618	11,366	11,550	9,065	10,298	19,368	14,073	9,899	12,324	10,694	10,046	9,120
Operating Margin	39.25%	14.54%	14.78%	11.54%	35.48%	73.76%	52.3%	44.52%	48.65%	46.76%	45.93%	43.54%
Net Income	6,975	8,709	8,709	7,318	4,425	13,537	7,754	5,097	5,758	5,450	5,348	4,622
Net Margin	22.11%	11.14%	11.14%	9.31%	15.25%	51.55%	28.82%	22.93%	22.73%	23.83%	24.45%	22.07%

Historical Growth Rates

Monetary values in CAD amounts except #	Average	LTM Jan 23	2025 Oct 31	2024 Oct 31	2023 Oct 31	2022 Oct 31	2021 Oct 31	2020 Oct 31	2019 Oct 31	2018 Oct 31	2017 Oct 31	2016 Oct 31
Revenue	39,118	78,149	78,149	78,558	29,021	26,259	26,909	22,233	25,332	22,870	21,874	20,947
Revenue Growth Rate	19.64%	0%	-0.521%	170.7%	10.52%	-2.42%	21.03%	-12.23%	10.77%	4.55%	4.42%	9.2%
Net Income	6,975	8,709	8,709	7,318	4,425	13,537	7,754	5,097	5,758	5,450	5,348	4,622
Net Margin	22.11%	11.14%	11.14%	9.31%	15.25%	51.55%	28.82%	22.93%	22.73%	23.83%	24.45%	22.07%
Net Income Growth Rate	14.67%	0%	19.01%	65.38%	-67.31%	74.58%	52.13%	-11.48%	5.65%	1.91%	15.71%	5.77%
Stockholders Equity	64,180	88,051	88,051	84,250	77,009	71,038	57,523	56,593	51,076	45,727	44,354	42,304
Equity Growth Rate	7.75%	0%	4.51%	9.4%	8.4%	23.49%	1.64%	10.8%	11.7%	3.1%	4.85%	7.31%
Return on Invested Capital (ROIC)	4.6%	3.06%	3.1%	2.64%	1.24%	7.13%	6.18%	4.21%	5.48%	4.53%	6.26%	6.78%
After-tax Operating Income	8,935	8,586	8,725	6,966	7,683	14,659	10,638	7,948	9,758	7,865	8,087	7,368
Income Tax Rate	22.9%	24.46%	24.46%	23.16%	25.39%	24.32%	24.41%	19.71%	20.82%	26.45%	19.5%	19.21%
Invested Capital	236,297	281,043	281,043	264,198	617,144	205,595	172,199	188,559	177,978	173,650	129,220	108,641