Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Best Buy Co., Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 0.2% to 1.7% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 9, DPO 56, DIO 55). At a 7.3% WACC with mid-year discounting, the terminal value (79% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 13.3x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $147.07 per share, suggesting BBY is undervalued by 133.6% at the current price of $62.97.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2027 | 2028 | 2029 | 2030 | 2031 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 1,870 | 1,897 | 1,932 | 1,956 | 1,989 | 2,039 |
| (−) Net Interest | 40 | 41 | 41 | 42 | 43 | 44 |
| (+) D&A | 774 | 772 | 732 | 723 | 733 | 751 |
| EBITDA | 2,684 | 2,709 | 2,705 | 2,721 | 2,764 | 2,834 |
| (−) Tax | 432 | 439 | 447 | 452 | 460 | — |
| (−) CapEx | 723 | 733 | 747 | 756 | 769 | — |
| (−) ΔWC | -587 | 14 | 17 | 12 | 17 | — |
| Free Cash Flow (FCF) | 2,116 | 1,523 | 1,494 | 1,500 | 1,519 | — |
| Peers' EBITDA Multiple | 13.3x | |||||
| Terminal Value | 37,800 | |||||
| WACC / Discount Rate | 7.25% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,043 | 1,371 | 1,254 | 1,174 | 1,108 | 26,635 |
| Enterprise Value | 33,585 | |||||
| Projection Period | 6,950 | 20.7% | ||||
| Terminal Value | 26,635 | 79.3% | ||||
| (−) Current Net Debt | 2,395 | |||||
| Equity Value | 31,190 | |||||
| (÷) Outstanding Shares | 212M | |||||
| Fair Price | $147 | +133.5% | ||||
| WACC \ EV/EBITDA Exit Multiple | 9.3x | 11.3x | 13.3x | 15.3x | 17.3x |
|---|---|---|---|---|---|
| 5.3% | $119 | $140 | $161 | $182 | $202 |
| 6.3% | $114 | $134 | $154 | $174 | $193 |
| 7.3% | $109 | $128 | $147 | $166 | $185 |
| 8.3% | $105 | $123 | $141 | $159 | $177 |
| 9.3% | $100 | $118 | $135 | $152 | $169 |
Current price: $62.97. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.