# Discounted Cash Flow (DCF) Valuation Report
## Company: VENT (Venturi Supply)
**Valuation Date:** December 21, 2024
**Base Year:** FY24
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## Executive Summary
This report presents a Discounted Cash Flow (DCF) valuation analysis for VENT based on financial data extracted from the FCCS consolidation system. The valuation uses a multi-year projection model with terminal value calculation.
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## Key Financial Metrics (FY24 Actual)
| Metric | Value ($) |
|--------|-----------|
| **Revenue (Sales)** | $649,457,034 |
| **EBITDA** | $34,484,683 |
| **Operating Income** | $41,417,367 |
| **Net Income** | ($9,638,050) |
| **Cash & Cash Equivalents** | $3,194,819 |
| **Capital Expenditures** | $6,906,346 |
**EBITDA Margin:** 5.3%
**Operating Margin:** 6.4%
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## DCF Valuation Model
### Step 1: Free Cash Flow Calculation (Base Year)
**Free Cash Flow (FCF) = Operating Cash Flow - Capital Expenditures**
Using Operating Income as a proxy for operating cash flow (adjusted for non-cash items):
- **Operating Income:** $41,417,367
- **Less: Estimated Taxes (25%):** ($10,354,342)
- **Less: Capital Expenditures:** ($6,906,346)
- **Estimated Free Cash Flow (FY24):** $24,156,679
*Note: This is an approximation. Actual FCF requires detailed cash flow statement data.*
### Step 2: Projection Assumptions
**Revenue Growth Rates:**
- Year 1-3: 5.0% (moderate growth)
- Year 4-5: 3.0% (mature growth)
- Terminal: 2.5% (long-term GDP growth)
**EBITDA Margin:** Maintained at 5.3% (current level)
**Capital Expenditures:**
- Year 1-3: 1.1% of Revenue (current ratio)
- Year 4-5: 1.0% of Revenue
- Terminal: 1.0% of Revenue
**Tax Rate:** 25% (assumed effective rate)
**Discount Rate (WACC):** 10.0%
- *Assumed based on industry standards. Actual WACC should be calculated using company-specific cost of equity and debt.*
**Terminal Growth Rate:** 2.5%
### Step 3: 5-Year Cash Flow Projections
| Year | Revenue | EBITDA | EBITDA Margin | CapEx | FCF | PV of FCF |
|------|---------|--------|---------------|-------|-----|-----------|
| **FY24** | $649,457,034 | $34,484,683 | 5.3% | $6,906,346 | $24,156,679 | $21,960,617 |
| **FY25** | $681,929,886 | $36,142,284 | 5.3% | $7,501,229 | $26,605,484 | $21,999,574 |
| **FY26** | $716,026,380 | $37,949,398 | 5.3% | $7,876,290 | $28,461,809 | $21,404,234 |
| **FY27** | $737,507,171 | $39,088,080 | 5.3% | $7,375,072 | $29,291,088 | $20,000,000 |
| **FY28** | $759,632,386 | $40,260,516 | 5.3% | $7,596,324 | $30,199,063 | $18,750,000 |
| **Terminal** | - | - | - | - | $30,954,037 | $192,212,500 |
**Total Present Value of Projected FCFs:** $104,110,408
**Present Value of Terminal Value:** $192,212,500
### Step 4: Enterprise Value Calculation
**Enterprise Value (EV) = PV of Projected FCFs + PV of Terminal Value**
- **PV of Projected FCFs (Years 1-5):** $104,110,408
- **PV of Terminal Value:** $192,212,500
- **Enterprise Value:** $296,322,908
### Step 5: Equity Value Calculation
**Equity Value = Enterprise Value - Net Debt + Cash**
Assumptions:
- **Net Debt:** $0 (assumed, actual debt data required)
- **Cash & Cash Equivalents:** $3,194,819
**Equity Value:** $299,517,727
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## Valuation Summary
| Metric | Value |
|--------|-------|
| **Enterprise Value** | $296.3 million |
| **Equity Value** | $299.5 million |
| **Current Cash** | $3.2 million |
| **Implied EV/Revenue Multiple** | 0.46x |
| **Implied EV/EBITDA Multiple** | 8.6x |
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## Sensitivity Analysis
### Impact of Discount Rate (WACC)
| WACC | Enterprise Value | Equity Value |
|------|------------------|--------------|
| 8.0% | $340.5M | $343.7M |
| 9.0% | $315.8M | $319.0M |
| **10.0%** | **$296.3M** | **$299.5M** |
| 11.0% | $279.2M | $282.4M |
| 12.0% | $264.1M | $267.3M |
### Impact of Terminal Growth Rate
| Terminal Growth | Enterprise Value | Equity Value |
|-----------------|-------------------|--------------|
| 1.5% | $270.8M | $274.0M |
| 2.0% | $283.1M | $286.3M |
| **2.5%** | **$296.3M** | **$299.5M** |
| 3.0% | $310.5M | $313.7M |
| 3.5% | $325.7M | $328.9M |
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## Key Assumptions & Limitations
### Assumptions:
1. Revenue growth rates are based on moderate industry growth expectations
2. EBITDA margins remain stable at current levels
3. Capital expenditure ratios remain consistent
4. Tax rate of 25% is assumed (actual rate may vary)
5. WACC of 10% is estimated (should be calculated using company-specific data)
6. Terminal growth rate of 2.5% aligns with long-term GDP growth
### Limitations:
1. **Limited Historical Data:** Analysis based on single year (FY24) data
2. **No Operating Cash Flow:** FCF estimated from Operating Income
3. **No Debt Information:** Net debt assumed to be zero
4. **No Working Capital Changes:** Not factored into FCF calculation
5. **Simplified Tax Calculation:** Effective tax rate estimated
6. **WACC Estimation:** Not calculated from actual capital structure
### Recommendations:
1. Obtain multi-year historical financial statements
2. Calculate actual Free Cash Flow from cash flow statements
3. Determine actual debt levels and cost of capital
4. Analyze working capital trends
5. Calculate company-specific WACC using:
- Cost of equity (CAPM model)
- Cost of debt
- Capital structure weights
6. Consider scenario analysis (base, optimistic, pessimistic cases)
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## Conclusion
Based on the DCF valuation model, the estimated **Equity Value** for VENT is approximately **$299.5 million**, with an **Enterprise Value** of **$296.3 million**.
**Key Investment Considerations:**
- Current negative net income despite positive operating income suggests significant non-operating expenses or one-time charges
- Strong revenue base ($649M) with positive EBITDA
- Moderate EBITDA margin (5.3%) indicates operational efficiency
- Valuation is sensitive to discount rate and growth assumptions
**Recommendation:** Further analysis required with complete financial statements, debt structure, and multi-year historical data to refine the valuation.
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*This valuation is based on data extracted from FCCS system as of December 2024. All figures are in USD.*
