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Estimating The Fair Value Of Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (BMV:GAPB)

Simply Wall St · 07/16 12:21

Key Insights

How far off is Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (BMV:GAPB) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. We will take advantage of the Discounted Cash Flow (DCF) model for this purpose. Believe it or not, it's not too difficult to follow, as you'll see from our example!

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.

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The Model

We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Levered FCF (MX$, Millions) Mex$8.22b Mex$9.42b Mex$14.9b Mex$19.5b Mex$24.2b Mex$28.9b Mex$33.6b Mex$38.2b Mex$42.8b Mex$47.6b
Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x1 Est @ 31.03% Est @ 24.23% Est @ 19.47% Est @ 16.14% Est @ 13.81% Est @ 12.18% Est @ 11.04%
Present Value (MX$, Millions) Discounted @ 16% Mex$7.1k Mex$7.0k Mex$9.5k Mex$10.7k Mex$11.4k Mex$11.7k Mex$11.7k Mex$11.5k Mex$11.1k Mex$10.6k

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = Mex$102b

The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (8.4%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 16%.

Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = Mex$48b× (1 + 8.4%) ÷ (16%– 8.4%) = Mex$660b

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= Mex$660b÷ ( 1 + 16%)10= Mex$147b

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is Mex$250b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of Mex$431, the company appears about fair value at a 13% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.

dcf
BMV:GAP B Discounted Cash Flow July 16th 2025

Important Assumptions

The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Grupo Aeroportuario del Pacífico. de as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 16%, which is based on a levered beta of 1.138. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

Check out our latest analysis for Grupo Aeroportuario del Pacífico. de

SWOT Analysis for Grupo Aeroportuario del Pacífico. de

Strength
  • Debt is well covered by earnings and cashflows.
Weakness
  • Earnings declined over the past year.
  • Dividend is low compared to the top 25% of dividend payers in the Infrastructure market.
Opportunity
  • Annual earnings are forecast to grow faster than the Mexican market.
  • Current share price is below our estimate of fair value.
Threat
  • Revenue is forecast to grow slower than 20% per year.

Looking Ahead:

Although the valuation of a company is important, it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. For Grupo Aeroportuario del Pacífico. de, we've put together three important aspects you should look at:

  1. Risks: Be aware that Grupo Aeroportuario del Pacífico. de is showing 2 warning signs in our investment analysis , you should know about...
  2. Future Earnings: How does GAP B's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the BMV every day. If you want to find the calculation for other stocks just search here.