Lendlease Group (ASX:LLC) Shares Could Be 39% Below Their Intrinsic Value Estimate

Simply Wall St.

Nov 22, 2025

AdvertisementKey Insights Using the 2 Stage Free Cash Flow to Equity, Lendlease Group fair value estimate is AU$8.52 Current share price of AU$5.17 suggests Lendlease Group is potentially 39% ...

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One way to achieve this is by employing the Discounted Cash Flow (DCF) model.  Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine.  Remember though, that there are many ways to estimate a company's value, and a DCF is just one method.  If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. What's The Estimated Valuation?   We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase.  To begin with, we have to get estimates of the next ten years of cash flows.   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.   Generally we assume that a dollar today is more valuable than a dollar in the future,  so we need to discount the sum of these future cash flows to arrive at a present value estimate:  10-year free cash flow (FCF) estimate  2026202720282029203020312032203320342035 Levered FCF (A$, Millions) AU$956.9mAU$154.1mAU$245.2mAU$319.5mAU$390.5mAU$455.1mAU$512.2mAU$562.4mAU$606.5mAU$645.7mGrowth Rate Estimate SourceAnalyst x2Analyst x2Analyst x2Est @ 30.32%Est @ 22.21%Est @ 16.54%Est @ 12.57%Est @ 9.79%Est @ 7.84%Est @ 6.48% Present Value (A$, Millions) Discounted @ 11% AU$862AU$125AU$179AU$210AU$231AU$242AU$246AU$243AU$236AU$226(\"Est\" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = AU$2.8b 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 (3.3%) 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 11%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = AU$646m× (1 + 3.3%) ÷ (11%– 3.3%) = AU$8.6bPresent Value of Terminal Value (PVTV)= TV / (1 + r)10= AU$8.6b÷ ( 1 + 11%)10= AU$3.0b The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is AU$5.8b.  To get the intrinsic value per share, we divide this by the total number of shares outstanding.  Compared to the current share price of AU$5.2, the company appears   quite good value    at a 39% 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. ASX:LLC Discounted Cash Flow November 21st 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 Lendlease Group 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 11%, which is based on a levered beta of 1.844. 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 Lendlease Group SWOT Analysis for Lendlease GroupStrength Debt is well covered by earnings. Balance sheet summary for LLC. Weakness Dividend is low compared to the top 25% of dividend payers in the Real Estate market.Opportunity Annual earnings are forecast to grow faster than the Australian market. Good value based on P/E ratio and estimated fair value. ThreatDebt is not well covered by operating cash flow. Paying a dividend but company has no free cash flows. Revenue is forecast to grow slower than 20% per year. Is LLC well equipped to handle threats?  Moving On:  Whilst important, the DCF calculation  shouldn't be the only metric you look at when researching a company.  The DCF model is not a perfect stock valuation tool.  Rather it should be seen as a guide to \"what assumptions need to be true for this stock to be under/overvalued?\"  If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different.   Why is the intrinsic value higher than the current share price?   For Lendlease Group, we've compiled three  essential  items  you should look at:   Risks: Take risks, for example - Lendlease Group has   3 warning signs  (and 1 which is a bit concerning)  we think you should know about.  Future Earnings: How does LLC'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. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!   PS. Simply Wall St updates its DCF calculation for every Australian stock every day, so if you want to find the intrinsic value of any other stock just search here.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}