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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (67478)	11/2/2025 1:14:42 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67786

TPL price currentyl 934. Big discount from DCF 0f 220. >>>>> Chain of Thought for DCF Valuation of TPL Stock To calculate the Discounted Cash Flow (DCF) value for Texas Pacific Land Corporation (TPL), a land and royalty company focused on oil and gas in the Permian Basin, we follow a standard two-stage DCF model. This involves projecting free cash flows (FCF) for 5 years, calculating a terminal value, discounting everything to present value using the weighted average cost of capital (WACC), and dividing by shares outstanding to get a per-share value. TPL's business is asset-light with high margins and low capex, so FCF is close to operating cash flow. I'll use publicly available financial data as of late 2024 (projected to early 2025, since the current date is November 2, 2025). Key assumptions are based on historical trends: Historical Data (2020-2024 averages/ latest): Latest annual FCF: ~$560 million (2024 estimate, based on operating cash flow of ~$570M minus minimal capex of ~$10M). Average revenue growth: ~15% (driven by Permian production increases, but conservative for projections). Shares outstanding: 76.4 million. Beta: 1.2 (from market data). Net debt: ~$0 (TPL has significant cash and no meaningful debt). Assumptions: Explicit forecast period: 5 years. Growth rate for FCF: 10% annually (conservative vs. historical 15%, accounting for oil price volatility and production growth). Terminal growth rate: 4% (above long-term GDP but reflective of energy sector stability). WACC: 8.5% (calculated as risk-free rate of 4% + beta * equity risk premium of 4% = 4% + 1.2*4% = 8.8%, rounded down for conservatism; no debt component since minimal leverage). No adjustments for net debt (already zero). Step 1: Project Future FCFs Start with base FCF of $560M. Grow at 10% for 5 years: Year Projected FCF ($M) 1 616 2 678 3 745 4 820 5 902 Step 2: Discount the FCFs to Present Value Discount each using WACC of 8.5%: Discount factor for year $ n $: $ (1 + 0.085)^n $ Year FCF ($M) Discount Factor PV of FCF ($M) 1 616 1.085 568 2 678 1.177 576 3 745 1.277 583 4 820 1.386 592 5 902 1.504 600 Sum of PV of explicit FCFs: $568M + $576M + $583M + $592M + $600M = $2,919M. Step 3: Calculate Terminal Value Terminal value at end of year 5: $ \frac{FCF_5 \times (1 + g)}{WACC - g} = \frac{902 \times 1.04}{0.085 - 0.04} = \frac{938}{0.045} = 20,844M $. PV of terminal value: $ 20,844 / 1.504 = 13,862M $. Step 4: Enterprise Value and Equity Value Enterprise value (EV) = Sum of PV FCFs + PV of TV = $2,919M + $13,862M = $16,781M. Equity value = EV - net debt = $16,781M - $0 = $16,781M. Step 5: Per-Share DCF Value Per-share value = Equity value / Shares outstanding = $16,781M / 76.4M shares ˜ $220. DCF Value Summary The estimated DCF value for TPL stock is $220 per share. Caveats: This is sensitive to assumptions—higher growth (e.g., 12%) or lower WACC (e.g., 7.5%) could push it to $300+, while oil price drops could lower it. TPL trades at a premium due to its royalty model (no drilling risk), so market price (~$800+ as of late 2024) implies more optimistic projections. For a custom model, adjust inputs based on latest filings. If you have specific assumptions (e.g., growth rate), I can refine this.