Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Quest Diagnostics Incorporated's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.6% to 0.6% 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 47, DPO 31, DIO 11). At a 7.0% WACC with mid-year discounting, the terminal value (84% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.4x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $252.17 per share, suggesting DGX is undervalued by 27.4% at the current price of $197.87.
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 | 1,741 | 1,806 | 1,888 | 1,987 | 1,998 | 2,048 |
| (−) Net Interest | 220 | 228 | 239 | 251 | 252 | 259 |
| (+) D&A | 433 | 453 | 476 | 503 | 533 | 546 |
| EBITDA | 2,394 | 2,487 | 2,603 | 2,741 | 2,784 | 2,853 |
| (−) Tax | 384 | 399 | 417 | 439 | 441 | — |
| (−) CapEx | 501 | 520 | 544 | 572 | 575 | — |
| (−) ΔWC | 1,094 | 41 | 52 | 62 | 7 | — |
| Free Cash Flow (FCF) | 414 | 1,528 | 1,591 | 1,669 | 1,760 | — |
| Peers' EBITDA Multiple | 14.4x | |||||
| Terminal Value | 41,057 | |||||
| WACC / Discount Rate | 7.01% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 401 | 1,380 | 1,343 | 1,316 | 1,297 | 29,253 |
| Enterprise Value | 34,990 | |||||
| Projection Period | 5,737 | 16.4% | ||||
| Terminal Value | 29,253 | 83.6% | ||||
| (−) Current Net Debt | 6,499 | |||||
| Equity Value | 28,491 | |||||
| (÷) Outstanding Shares | 113M | |||||
| Fair Price | $252 | +27.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.4x | 12.4x | 14.4x | 16.4x | 18.4x |
|---|---|---|---|---|---|
| 5.0% | $201 | $241 | $281 | $320 | $360 |
| 6.0% | $191 | $228 | $266 | $304 | $341 |
| 7.0% | $180 | $216 | $252 | $288 | $324 |
| 8.0% | $170 | $205 | $239 | $273 | $308 |
| 9.0% | $161 | $194 | $227 | $260 | $292 |
Current price: $197.87. 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.