Ingersoll Rand (Ingersoll Rand) Intrinsic Value: DCF (FCF Based) : $43.65 (As of Apr. 27, 2024)

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Ingersoll Rand Intrinsic Value: DCF (FCF Based) Chart

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Competitive Comparison of Ingersoll Rand's Intrinsic Value: DCF (FCF Based)

For the Specialty Industrial Machinery subindustry, Ingersoll Rand's Price-to-DCF (FCF Based), along with its competitors' market caps and Price-to-DCF (FCF Based) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

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Ingersoll Rand's Price-to-DCF (FCF Based) Distribution in the Industrial Products Industry

For the Industrial Products industry and Industrials sector, Ingersoll Rand's Price-to-DCF (FCF Based) distribution charts can be found below:

* The bar in red indicates where Ingersoll Rand's Price-to-DCF (FCF Based) falls into.

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Ingersoll Rand Intrinsic Value: DCF (FCF Based) Calculation

This is the intrinsic value calculated from the Discounted Cash Flow model with default parameters. In a discounted cash flow model, the future cash flow is estimated based on a cash flow growth rate and a discount rate. The cash flow of the future is discounted to its current value at the discount rate. All of the discounted future cash flow is added together to get the current intrinsic value of the company.

Usually a two-stage model is used when calculating a stock's intrinsic value using a discounted cash flow model. The first stage is called the growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 11%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate and rounded up to the nearest integer. It is updated daily. The current risk-free rate is 4.66%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default. Then we added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 8.00%
The Growth Rate in the growth stage is initially set as the default 10-Year FCF Growth Rate (Per Share). In cases where the 10-year growth rate is unavailable, it defaults to using the 5-Year FCF Growth Rate (Per Share). If both the 10-year and 5-year growth rates are unavailable, the system defaults to the 3-Year FCF Growth Rate (Per Share).
However, it's important to note that there is a growth rate range. If the calculated growth rate exceeds 20%, it will be capped at 20%. Conversely, if the calculated growth rate falls below 5%, it will be adjusted to 5% to maintain a reasonable range.
=> Ingersoll Rand's average Free Cash Flow Growth Rate in the past 5 years was 8.00%, which is between 5% and 20%. => GuruFocus defaults => Growth Rate: 8.00%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. Free Cash Flow per Share: fcf = $3.110.
However, GuruFocus DCF calculator is actually a Discounted Earnings calculator, the EPS without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

Ingersoll Rand's Intrinsic Value: DCF (FCF Based) for today is calculated as

set x = (1+g1)/(1+d) = (1+0.08)/(1+0.11) = 0.97297297297297
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.11) = 0.93693693693694

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Ingersoll Rand  (NYSE:IR) Intrinsic Value: DCF (FCF Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book per Share, Graham Number, Median PS Value etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.

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Be Aware

What you need to know about the DCF model:

1. The DCF model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that have relatively consistent performance.
4. The DCF model works poorly for inconsistent performers such as cyclicals.
5. What discount rate should you use? Your expected return from the investment is a good discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.

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Ingersoll Rand Intrinsic Value: DCF (FCF Based) Related Terms

Thank you for viewing the detailed overview of Ingersoll Rand's Intrinsic Value: DCF (FCF Based) provided by GuruFocus.com. Please click on the following links to see related term pages.

Predictability Rank Intrinsic Value: DCF (Earnings Based) Intrinsic Value: DCF (Dividends Based) Intrinsic Value: Projected FCF Free Cash Flow Free Cash Flow per Share Margin of Safety % (DCF FCF Based) Margin of Safety % (DCF Earnings Based) Margin of Safety % (DCF Dividends Based)

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Ingersoll Rand (Ingersoll Rand) Business Description

Executives

Andrew R Schiesl	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Joanna Sohovich	director	123 MAIN STREET, BRISTOL CT 06010
Julie Schertell	director	3460 PRESTON RIDGE ROAD, SUITE 600, ALPHARETTA GA 30005
Santiago Arias Duval	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Vikram Kini	officer: Senior Vice President and CFO	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Matthew J Emmerich	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Vicente Reynal	director, officer: Chief Executive Officer	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Kathleen M. Keene	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Gary E Gillespie	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Michael J Scheske	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Jennifer Hartsock	director	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Viseras Enrique Minarro	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Nicholas J Kendall-jones	officer: See Remarks	C/O INGERSOLL RAND INC., 525 HARBOUR PLACE DRIVE, SUITE 600, DAVIDSON NC 28036
Michael Stubblefield	director	C/O AVANTOR, INC., 100 MATSONFORD ROAD, RADNOR PA 19087
Mark P Stevenson	director	850 LINCOLN CENTRE DRIVE, FOSTER CITY CA 94404