First Republic Bank (FRC-PJ) Discounted Future Market Cap

First Republic Bank

FRC-PJ (NYSE)

(%)

Valuation
First Republic Bank 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

USD

Market Price USD

* 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	4.57 USD
Estimated net income	3.37 Bil. USD
Estimated market capitalization	1.29 Bil. USD
Market capitalization discounted to present	845.3 Mil. USD
Shares Outstanding	185 Mil.
Earnings Per Share (EPS)	7.98 USD
Market Price	1.63 USD
Price to Earnings (PE) Ratio	0.382

Historical and forecasted data

Monetary values in USD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "timeseries": "annual", "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [{"l": "2013", "x": "2013-12-31", "y": 1468525000}, {"l": "2014", "x": "2014-12-31", "y": 1649115000}, {"l": "2015", "x": "2015-12-31", "y": 1989145000}, {"l": "2016", "x": "2016-12-31", "y": 2375685000}, {"l": "2017", "x": "2017-12-31", "y": 2912079000}, {"l": "2018", "x": "2018-12-31", "y": 3581851000}, {"l": "2019", "x": "2019-12-31", "y": 3253989000}, {"l": "2020", "x": "2020-12-31", "y": 3853318000}, {"l": "2021", "x": "2021-12-31", "y": 4960000000}, {"l": "2022", "x": "2022-12-31", "y": 5773000000}, {"l": "2023", "x": "2023-12-31", "y": 6707071400, "oy": 6707071400, "e": true, "d": 2023, "g": 16.18, "og": 16.18}, {"l": "2024", "x": "2024-12-31", "y": 7792275552, "oy": 7792275552, "e": true, "d": 2024, "g": 16.18, "og": 16.18}, {"l": "2025", "x": "2025-12-31", "y": 9053065736, "oy": 9053065736, "e": true, "d": 2025, "g": 16.18, "og": 16.18}, {"l": "2026", "x": "2026-12-31", "y": 10517851773, "oy": 10517851773, "e": true, "d": 2026, "g": 16.18, "og": 16.18}, {"l": "2027", "x": "2027-12-31", "y": 12219640190, "oy": 12219640190, "e": true, "d": 2027, "g": 16.18, "og": 16.18}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [{"l": "2013", "x": "2013-12-31", "y": 462070000}, {"l": "2014", "x": "2014-12-31", "y": 487006000}, {"l": "2015", "x": "2015-12-31", "y": 522145000}, {"l": "2016", "x": "2016-12-31", "y": 673428000}, {"l": "2017", "x": "2017-12-31", "y": 757660000}, {"l": "2018", "x": "2018-12-31", "y": 853828000}, {"l": "2019", "x": "2019-12-31", "y": 930329000}, {"l": "2020", "x": "2020-12-31", "y": 1064151000}, {"l": "2021", "x": "2021-12-31", "y": 1478000000}, {"l": "2022", "x": "2022-12-31", "y": 1665000000}, {"l": "2023", "x": "2023-12-31", "y": 1851151706, "oy": 1851151706, "e": true, "d": 2023, "g": 11.18, "og": 11.18}, {"l": "2024", "x": "2024-12-31", "y": 2150668052, "oy": 2150668052, "e": true, "d": 2024, "g": 16.18, "og": 16.18}, {"l": "2025", "x": "2025-12-31", "y": 2498646143, "oy": 2498646143, "e": true, "d": 2025, "g": 16.18, "og": 16.18}, {"l": "2026", "x": "2026-12-31", "y": 2902927089, "oy": 2902927089, "e": true, "d": 2026, "g": 16.18, "og": 16.18}, {"l": "2027", "x": "2027-12-31", "y": 3372620692, "oy": 3372620692, "e": true, "d": 2027, "g": 16.18, "og": 16.18}], "dataType": ".", "displayAs": "line", "dataTimeseries": "annual", "hidden": false}], "editableDates": {"2023-12-31": 39, "2024-12-31": 40, "2025-12-31": 41, "2026-12-31": 42, "2027-12-31": 43}, "properties": {"display_table": true}, "width": "full"}

Edit Chart Values	2023-12-31	2024-12-31	2025-12-31	2026-12-31	2027-12-31

↳ Growth Rate

Estimated Future Values

Monetary values in USD amounts except #	2022 Dec 31	LTM Feb 01	2023 Dec 31	2024 Dec 31	2025 Dec 31	2026 Dec 31	2027 Dec 31
Revenue	5,773	6,582	6,707	7,792	9,053	10,518	12,220
Revenue Growth Rate	16.39%	14.01%	16.18%	16.18%	16.18%	16.18%	16.18%
Net Income	1,665	1,533	1,851	2,151	2,499	2,903	3,373

Monetary values in USD

amounts except #

2022
Dec 31

LTM
Feb 01

2023
Dec 31

2024
Dec 31

2025
Dec 31

2026
Dec 31

2027
Dec 31

Revenue

5,773

6,582

6,707

7,792

9,053

10,518

12,220

Revenue Growth Rate

16.39%

14.01%

16.18%

Net Income

1,665

1,533

1,851

2,151

2,499

2,903

3,373

Historical Values

Monetary values in USD amounts except #	Average	LTM Feb 01	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31	2014 Dec 31	2013 Dec 31
Revenue	3,491	6,582	5,773	4,960	3,853	3,254	3,582	2,912	2,376	1,989	1,649	1,469
Cost of Revenue	123.7	0	0	0	0	0	614.4	358.9	207.1	180.2	0	0
Gross Profit	3,367	6,582	5,773	4,960	3,853	3,254	2,967	2,553	2,169	1,809	1,649	1,469
Gross Margin	95.7%	100%	100%	100%	100%	100%	82.85%	87.67%	91.28%	90.94%	100%	100%
Operating Income	1,445	2,465	3,029	1,828	1,334	1,133	1,582	1,212	991.3	838.1	822.1	663.6
Operating Margin	41.9%	37.45%	52.47%	36.85%	34.62%	34.83%	44.17%	41.63%	41.73%	42.13%	49.85%	45.19%
Net Income	947.9	1,533	1,665	1,478	1,064	930.3	853.8	757.7	673.4	522.1	487	462.1
Net Margin	27.6%	23.29%	28.84%	29.8%	27.62%	28.59%	23.84%	26.02%	28.35%	26.25%	29.53%	31.46%

Historical Growth Rates

Monetary values in USD amounts except #	Average	LTM Feb 01	2022 Dec 31	2021 Dec 31	2020 Dec 31	2019 Dec 31	2018 Dec 31	2017 Dec 31	2016 Dec 31	2015 Dec 31	2014 Dec 31	2013 Dec 31
Revenue	3,491	6,582	5,773	4,960	3,853	3,254	3,582	2,912	2,376	1,989	1,649	1,469
Revenue Growth Rate	16.18%	14.01%	16.39%	28.72%	18.42%	-9.15%	23%	22.58%	19.43%	20.62%	12.3%	11.68%
Net Income	947.9	1,533	1,665	1,478	1,064	930.3	853.8	757.7	673.4	522.1	487	462.1
Net Margin	27.6%	23.29%	28.84%	29.8%	27.62%	28.59%	23.84%	26.02%	28.35%	26.25%	29.53%	31.46%
Net Income Growth Rate	13.5%	-7.93%	12.65%	38.89%	14.38%	8.96%	12.69%	12.51%	28.97%	7.22%	5.4%	14.81%
Stockholders Equity	10,090	17,990	17,446	15,898	11,751	9,851	8,678	7,818	6,909	5,706	4,778	4,160
Equity Growth Rate	16.62%	3.12%	9.74%	35.29%	19.28%	13.52%	10.99%	13.17%	21.08%	19.4%	14.87%	22.41%
Return on Invested Capital (ROIC)	1.99%	1.38%	7.96%	0.916%	-1.64%	4.17%	3.04%	1.29%	1.2%	1.16%	1.26%	1.12%
After-tax Operating Income	1,141	1,926	2,356	1,478	1,064	930.3	1,284	1,007	806.6	633.6	597.7	462.1
Income Tax Rate	21.62%	21.87%	22.23%	19.15%	20.23%	17.91%	18.82%	16.94%	18.63%	24.4%	27.3%	30.36%
Invested Capital	56,196	139,413	29,602	161,400	-65,015	22,315	42,265	77,804	67,074	54,452	47,536	41,305