Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Electronic Arts Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 9.2% to 8.2% 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 32, DPO 22, DIO 60). At a 8.1% WACC with mid-year discounting, the terminal value (91% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 29.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $204.61 per share, suggesting EA is fairly valued by 1.1% at the current price of $202.41.
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 | 1,634 | 1,693 | 1,781 | 1,945 | 2,103 | 2,156 |
| (−) Net Interest | 64 | 67 | 70 | 77 | 83 | 85 |
| (+) D&A | 188 | 206 | 213 | 219 | 231 | 237 |
| EBITDA | 1,886 | 1,966 | 2,065 | 2,241 | 2,417 | 2,478 |
| (−) Tax | 439 | 455 | 478 | 522 | 565 | — |
| (−) CapEx | 216 | 224 | 236 | 257 | 278 | — |
| (−) ΔWC | 345 | 33 | 50 | 92 | 89 | — |
| Free Cash Flow (FCF) | 886 | 1,254 | 1,301 | 1,369 | 1,485 | — |
| Peers' EBITDA Multiple | 29.1x | |||||
| Terminal Value | 72,125 | |||||
| WACC / Discount Rate | 8.05% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 853 | 1,117 | 1,072 | 1,044 | 1,048 | 48,967 |
| Enterprise Value | 54,100 | |||||
| Projection Period | 5,133 | 9.5% | ||||
| Terminal Value | 48,967 | 90.5% | ||||
| (−) Current Net Debt | 82 | |||||
| Equity Value | 54,018 | |||||
| (÷) Outstanding Shares | 264M | |||||
| Fair Price | $205 | +1.1% | ||||
| WACC \ EV/EBITDA Exit Multiple | 25.1x | 27.1x | 29.1x | 31.1x | 33.1x |
|---|---|---|---|---|---|
| 6.1% | $196 | $210 | $224 | $238 | $252 |
| 7.1% | $187 | $201 | $214 | $227 | $241 |
| 8.1% | $179 | $192 | $205 | $217 | $230 |
| 9.1% | $171 | $184 | $196 | $208 | $220 |
| 10.1% | $164 | $176 | $187 | $199 | $211 |
Current price: $202.41. 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.