Using an unlevered Free Cash Flow to Firm (FCFF) model, we project D.R. Horton, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from -1.5% to 5.4% 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 19, DIO 329). At a 8.3% WACC with mid-year discounting, the terminal value (71% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 9.8x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $225.20 per share, suggesting DHI is undervalued by 64.1% at the current price of $137.25.
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 | 5,367 | 5,673 | 6,042 | 6,367 | 6,710 | 6,877 |
| (−) Net Interest | 674 | 713 | 759 | 800 | 843 | 864 |
| (+) D&A | 173 | 156 | 164 | 175 | 185 | 190 |
| EBITDA | 6,214 | 6,542 | 6,966 | 7,343 | 7,738 | 7,932 |
| (−) Tax | 1,242 | 1,313 | 1,398 | 1,473 | 1,552 | — |
| (−) CapEx | 180 | 191 | 203 | 214 | 226 | — |
| (−) ΔWC | -3,286 | 1,214 | 1,459 | 1,286 | 1,356 | — |
| Free Cash Flow (FCF) | 8,079 | 3,825 | 3,906 | 4,369 | 4,605 | — |
| Peers' EBITDA Multiple | 9.8x | |||||
| Terminal Value | 77,570 | |||||
| WACC / Discount Rate | 8.34% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 7,762 | 3,392 | 3,197 | 3,301 | 3,211 | 51,968 |
| Enterprise Value | 72,829 | |||||
| Projection Period | 20,862 | 28.6% | ||||
| Terminal Value | 51,968 | 71.4% | ||||
| (−) Current Net Debt | 3,046 | |||||
| Equity Value | 69,784 | |||||
| (÷) Outstanding Shares | 310M | |||||
| Fair Price | $225 | +64.1% | ||||
| WACC \ EV/EBITDA Exit Multiple | 5.8x | 7.8x | 9.8x | 11.8x | 13.8x |
|---|---|---|---|---|---|
| 6.3% | $169 | $207 | $244 | $282 | $320 |
| 7.3% | $163 | $199 | $234 | $270 | $306 |
| 8.3% | $157 | $191 | $225 | $259 | $294 |
| 9.3% | $151 | $184 | $216 | $249 | $282 |
| 10.3% | $145 | $177 | $208 | $239 | $271 |
Current price: $137.25. 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.