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Stepan Company

Intrinsic Value Analysis (Discounted Cash Flow)Industry: Chemicals - SpecialtySector: Basic Materials

Fair Value Summary

Current Price$48.24
5Y Range-34.67 – -32.11
5Y Selected-33.39
(-) Safety Margin84.87%
5Y Buy Price$-5.05
Upside (to Buy Price)-110.47%
10Y Range-34.19 – -32.01
10Y Selected-33.10
(-) Safety Margin84.87%
10Y Buy Price$-5.01
Upside (to Buy Price)-110.38%

Company Predictability & Safety

MetricValue
Revenue R2 (5Y)0.0847
Revenue R2 (10Y)0.5350
Net Income R2 (5Y)0.6025
Net Income R2 (10Y)0.0082
EBITDA R2 (5Y)0.4910
EBITDA R2 (10Y)0.0127
FCF R2 (5Y)0.0225
FCF R2 (10Y)0.3836
Safety Score0.1513

DA 10-Year Projection

Metric2025202620272028202920302031203220332034
% Growth4.62%4.55%4.48%4.41%4.35%4.28%4.21%4.14%4.07%4.00%
Revenue2,281.052,384.922,491.862,601.872,714.942,831.052,950.163,072.253,197.263,325.15
EBITDA195.78204.69213.87223.32233.02242.99253.21263.69274.42285.39
D&A-94.87-99.19-103.64-108.21-112.92-117.75-122.70-127.78-132.98-138.30
EBIT100.91105.50110.24115.10120.10125.24130.51135.91141.44147.10
Pro forma Taxes-23.17-24.22-25.31-26.43-27.57-28.75-29.96-31.20-32.47-33.77
NOPAT77.7481.2884.9388.6892.5396.49100.55104.71108.97113.33
Capital Expenditures-164.18-171.66-179.36-187.27-195.41-203.77-212.34-221.13-230.13-239.33
NWC Investment-17.75-18.29-18.83-19.38-19.91-20.45-20.98-21.50-22.02-22.52
(+) D&A94.8799.19103.64108.21112.92117.75122.70127.78132.98138.30
Free Cash Flow-9.32-9.48-9.63-9.76-9.88-9.99-10.08-10.15-10.20-10.24
Diluted Shares Outstanding22,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.0022,893,750.00

Discounting Periods

MetricDec-25Dec-26Dec-27Dec-28Dec-29Dec-30Dec-31Dec-32Dec-33Dec-34
Period Start9/30/251/1/261/1/271/1/281/1/291/1/301/1/311/1/321/1/331/1/34
Period End12/31/2512/31/2612/31/2712/31/2812/31/2912/31/3012/31/3112/31/3212/31/3312/31/34
Mid-Point11/15/257/2/267/2/277/1/287/2/297/2/307/2/317/1/327/2/337/2/34
Time (t)0.100.461.462.463.464.465.466.467.468.46
Valuation Date1/16/26

Base Case Projected Flows

WACC: 9.10%Terminal Growth: 2.27%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.880.810.740.680.620.570.520.48
PV UFCF-9.24-9.11-8.48-7.88-7.31-6.77-6.26-5.78-5.33-4.90
Raw: -147.95
-104.80
Raw: -153.26
-70.24

Base Case Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value-146.81-141.30
(-) Net Debt611.20611.20
Equity Value-758.01-752.50
(/) Shares Out22.8922.89
Fair Value$-33.11$-32.87
(-) Safety Margin84.87%84.87%
Buy Price$-5.01$-4.97
Current Price$48.24$48.24
Upside (to Buy Price)-110.38%-110.31%

Conservative Projected Flows

WACC: 10.10%Terminal Growth: 1.77%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.870.790.720.650.590.540.490.44
PV UFCF-9.23-9.07-8.36-7.70-7.08-6.50-5.96-5.45-4.98-4.54
Raw: -120.71
-82.47
Raw: -125.05
-52.81

Conservative Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value-123.93-121.69
(-) Net Debt611.20611.20
Equity Value-735.13-732.89
(/) Shares Out22.8922.89
Fair Value$-32.11$-32.01
(-) Safety Margin84.87%84.87%
Buy Price$-4.86$-4.84
Current Price$48.24$48.24
Upside (to Buy Price)-110.07%-110.04%

Aggressive Projected Flows

WACC: 8.10%Terminal Growth: 2.77%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.890.830.760.710.650.600.560.52
PV UFCF-9.25-9.15-8.59-8.06-7.55-7.06-6.59-6.14-5.71-5.30
Raw: -190.51
-139.96
Raw: -197.35
-98.23

Aggressive Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value-182.55-171.61
(-) Net Debt611.20611.20
Equity Value-793.75-782.81
(/) Shares Out22.8922.89
Fair Value$-34.67$-34.19
(-) Safety Margin84.87%84.87%
Buy Price$-5.25$-5.17
Current Price$48.24$48.24
Upside (to Buy Price)-110.87%-110.72%

Reverse DCF: Market Implied Growth

Current Price$48.24
WACC Used9.1%
IMPLIED REVENUE GROWTH101.25%
Metric2027202820292030203120322033203420352036
Implied Revenue4,636.369,330.4518,777.0737,787.9376,046.37153,039.61307,984.75619,804.271,247,325.832,510,182.33
Constant Implied Growth101.25%101.25%101.25%101.25%101.25%101.25%101.25%101.25%101.25%101.25%
Implied Free Cash Flow0.460.931.883.787.6015.3030.8061.98124.73251.02
Discount Factor0.930.810.740.680.620.570.520.480.440.40
Present Value of Implied FCF0.430.751.392.564.738.7216.0829.6754.73100.96

Rolling Historical DCF (Backtest)

Valuation based on actual realized growth.
YearValuation DateActual PriceRealized Growth (5Y)Calculated Fair ValueValuation Delta
20192019-12-31$102.443.10%$87.15-14.92%
20182018-12-31$74.008.74%$81.5210.16%
20172017-12-31$78.979.19%$117.4748.75%
20162016-12-31$81.483.37%$79.47-2.47%
20152015-12-31$49.690.61%$36.64-26.26%
20142014-12-31$40.081.74%$-22.47-156.07%
20132013-12-31$65.631.16%$34.15-47.96%
20122012-12-31$55.54-0.71%$12.73-77.08%
20112011-12-31$40.08-2.42%$-9.34-123.30%
20102010-12-31$38.14-2.60%$-8.98-123.54%
20092009-12-31$32.413.02%$107.48231.62%
20082008-12-31$23.506.89%$-28.93-223.12%
20072007-12-31$16.273.46%$0.26-98.38%
20062006-12-31$15.842.67%$-13.50-185.26%
20052005-12-31$13.450.86%$-5.56-141.33%
20042004-12-31$12.184.18%$4.28-64.89%
20032003-12-31$12.8211.20%$11.07-13.64%
20022002-12-31$12.5011.68%$7.42-40.64%
20012001-12-31$12.1411.42%$20.3467.56%
20002000-12-31$11.8410.05%$26.74125.81%
19991999-12-31$11.696.71%$12.9510.81%
19981998-12-31$13.314.80%$8.38-37.01%
19971997-12-31$14.816.55%$21.7546.89%
19961996-12-31$10.199.14%$17.0267.06%
19951995-12-31$8.3111.21%$-10.76-229.45%

Monte Carlo Simulation (1,000 Iterations)

Mean Fair Value
$-33.01
Median
$-32.87
10th Percentile
$-34.28
90th Percentile
$-31.95

Fair Value Distribution

$-38.49 - $-38.12
1
$-38.12 - $-37.75
0
$-37.75 - $-37.38
2
$-37.38 - $-37.01
1
$-37.01 - $-36.64
3
$-36.64 - $-36.27
1
$-36.27 - $-35.90
4
$-35.90 - $-35.52
9
$-35.52 - $-35.15
8
$-35.15 - $-34.78
15
$-34.78 - $-34.41
37
$-34.41 - $-34.04
53
$-34.04 - $-33.67
62
$-33.67 - $-33.30
116
$-33.30 - $-32.93
160
$-32.93 - $-32.56
182
$-32.56 - $-32.18
165
$-32.18 - $-31.81
122
$-31.81 - $-31.44
45
$-31.44 - $-31.07
14