Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Costco Wholesale Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 8.4% to 5.1% 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 4, DPO 32, DIO 30). At a 6.8% WACC with mid-year discounting, the terminal value (87% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.0x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $575.46 per share, suggesting COST is overvalued by 41.4% at the current price of $982.41.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 10,339 | 11,136 | 11,983 | 12,692 | 13,335 | 13,668 |
| (−) Net Interest | 206 | 222 | 239 | 253 | 266 | 272 |
| (+) D&A | 4,402 | 4,780 | 5,182 | 5,587 | 5,991 | 6,140 |
| EBITDA | 14,947 | 16,138 | 17,404 | 18,532 | 19,591 | 20,081 |
| (−) Tax | 2,562 | 2,759 | 2,969 | 3,145 | 3,304 | — |
| (−) CapEx | 5,479 | 5,901 | 6,350 | 6,725 | 7,066 | — |
| (−) ΔWC | 305 | 142 | 151 | 126 | 114 | — |
| Free Cash Flow (FCF) | 6,602 | 7,336 | 7,934 | 8,536 | 9,107 | — |
| Peers' EBITDA Multiple | 15.0x | |||||
| Terminal Value | 301,616 | |||||
| WACC / Discount Rate | 6.84% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 6,387 | 6,643 | 6,724 | 6,771 | 6,761 | 216,636 |
| Enterprise Value | 249,923 | |||||
| Projection Period | 33,287 | 13.3% | ||||
| Terminal Value | 216,636 | 86.7% | ||||
| (−) Current Net Debt | (5,988) | |||||
| Equity Value | 255,911 | |||||
| (÷) Outstanding Shares | 445M | |||||
| Fair Price | $575 | -41.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 11.0x | 13.0x | 15.0x | 17.0x | 19.0x |
|---|---|---|---|---|---|
| 4.8% | $485 | $556 | $627 | $699 | $770 |
| 5.8% | $465 | $533 | $601 | $669 | $737 |
| 6.8% | $446 | $511 | $575 | $640 | $705 |
| 7.8% | $428 | $490 | $552 | $613 | $675 |
| 8.8% | $411 | $470 | $529 | $588 | $647 |
Current price: $982.41. 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.