Using an unlevered Free Cash Flow to Firm (FCFF) model, we project EPAM Systems, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.5% to 9.8% 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 73, DPO 4, DIO 60). At a 9.3% WACC with mid-year discounting, the terminal value (83% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 10.5x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $190.33 per share, suggesting EPAM is undervalued by 38.9% at the current price of $137.02.
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 | 773 | 830 | 894 | 981 | 1,077 | 1,104 |
| (−) Net Interest | 1 | 1 | 1 | 1 | 1 | 1 |
| (+) D&A | 59 | 53 | 53 | 65 | 79 | 81 |
| EBITDA | 833 | 883 | 948 | 1,047 | 1,157 | 1,186 |
| (−) Tax | 150 | 161 | 173 | 190 | 209 | — |
| (−) CapEx | 78 | 84 | 90 | 99 | 109 | — |
| (−) ΔWC | 728 | 130 | 147 | 201 | 221 | — |
| Free Cash Flow (FCF) | -122 | 508 | 537 | 557 | 619 | — |
| Peers' EBITDA Multiple | 10.5x | |||||
| Terminal Value | 12,414 | |||||
| WACC / Discount Rate | 9.26% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | -117 | 445 | 430 | 409 | 415 | 7,972 |
| Enterprise Value | 9,554 | |||||
| Projection Period | 1,582 | 16.6% | ||||
| Terminal Value | 7,972 | 83.4% | ||||
| (−) Current Net Debt | (1,152) | |||||
| Equity Value | 10,706 | |||||
| (÷) Outstanding Shares | 56M | |||||
| Fair Price | $190 | +39.0% | ||||
| WACC \ EV/EBITDA Exit Multiple | 6.5x | 8.5x | 10.5x | 12.5x | 14.5x |
|---|---|---|---|---|---|
| 7.3% | $146 | $176 | $206 | $235 | $265 |
| 8.3% | $141 | $169 | $198 | $226 | $255 |
| 9.3% | $136 | $163 | $190 | $217 | $244 |
| 10.3% | $131 | $157 | $183 | $209 | $235 |
| 11.3% | $127 | $152 | $176 | $201 | $226 |
Current price: $137.02. 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.