On August 04, 2026, we conducted a DCF analysis for HDFC Bank Ltd HDB amidst a challenging price performance context, with the stock down 32.9% year-to-date and 35.7% over the past year. The analysis indicates a consensus across various valuation models that the stock is undervalued. Here are the key findings:
- DCF Earnings-based intrinsic value of $28.11 versus current price of $24.10 (margin of safety: 14.3%)
- DCF Free Cash Flow-based intrinsic value of $54.11, providing a second opinion on valuation
- GF Scoreâ„¢ of 60/100 indicates moderate reliability of the DCF inputs
What Is HDB Worth? DCF Earnings-Based Model
The DCF earnings-based model employs a two-stage approach to assess HDB's intrinsic value. The first stage anticipates significant growth in earnings over the next ten years, while the second stage accounts for a more modest terminal growth rate thereafter. Below are the assumptions used in this model:
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $1.51 |
| 10-Year Growth Rate | 16.1% |
| 10-Year Treasury Rate | 4.70% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
The calculation summary for the two-stage model is as follows:
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 16.1%, discounted at 11% | $15.09 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $13.02 |
| Intrinsic Value | Growth + Terminal | $28.11 |
With the current price at $24.10, HDB appears modestly undervalued with a margin of safety of 14.3%. It is important to note that GuruFocus uses EPS excluding non-recurring items as research indicates that stock prices correlate more closely with earnings than with free cash flow. For further calculations, you can visit the HDB DCF Calculator.
What Does the Free Cash Flow DCF Say?
The free cash flow (FCF) based intrinsic value for HDB is calculated at $54.11, which significantly contrasts with the earnings-based intrinsic value. This suggests that the stock is significantly undervalued, with a margin of safety of 55.5%. Both models indicate that HDB is undervalued, providing a consistent perspective on the stock's valuation.
How Does GF Valueâ„¢ Compare to the DCF Models?
The GF Value™ for HDB stands at $29.54, offering a third perspective on the stock's valuation. GF Value™ is a proprietary measure from GuruFocus that takes into account historical trading multiples, past business growth, and future performance estimates. All three valuation models—DCF earnings, DCF FCF, and GF Value™—align in suggesting that HDB is undervalued, reinforcing the consensus view. For more details, visit the GF Value™ page.
What Does HDB's GF Scoreâ„¢ Tell Us?
The GF Scoreâ„¢ measures a company's financial strength, profitability, growth potential, valuation, and momentum, providing an overall assessment of its investment quality. HDB's score of 60/100 indicates moderate reliability, but its predictability rank of 2 out of 5 stars suggests that the DCF model may be less reliable for this stock. Below is a summary of HDB's GF Scoreâ„¢ metrics:
| Metric | Rating |
|---|---|
| GF Scoreâ„¢ | 60/100 |
| Financial Strength | 3/10 |
| Profitability | 6/10 |
| Growth | 3/10 |
| Valuation | 8/10 |
| Momentum | 2/10 |
For more insights, visit the HDB stock page.
Key Assumptions and Limitations
It is essential to recognize that DCF models are highly sensitive to the assumptions made regarding growth rates and discount rates. Stocks with low predictability ratings, such as HDB's 2 out of 5 stars, tend to produce less reliable DCF estimates. The terminal growth rate of 4% is a simplifying assumption that may not fully capture future market conditions.
What This Means for Investors
In summary, the consensus from the DCF earnings model, DCF FCF model, and GF Valueâ„¢ indicates that HDB is undervalued. The presence of 18 gurus holding the stock, with 10 increasing their positions, adds a layer of confidence to this valuation, although insider activity shows net selling over the past three months. This mixed signal suggests caution, but the overall consensus remains positive. For those interested in a deeper analysis, check out the HDB DCF Calculator.
Frequently Asked Questions
What is HDB's intrinsic value based on DCF?
HDB's intrinsic value is $28.11 based on the earnings-based DCF model and $54.11 based on the FCF-based DCF model.
Is HDB overvalued or undervalued?
HDB is considered undervalued based on both the DCF and GF Valueâ„¢ consensus.
How reliable is the DCF model for HDB?
The DCF model's reliability for HDB is limited, given its predictability rank of 2 out of 5 stars.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
