Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Erie Indemnity Company's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 4.7% to 11.5% 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 68, DPO 23, DIO 60). At a 8.0% WACC with mid-year discounting, the terminal value (107% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.3x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $89.15 per share, suggesting ERIE is overvalued by 63.5% at the current price of $244.07.
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 | 197 | 220 | 245 | 273 | 304 | 312 |
| (−) Net Interest | 2 | 2 | 2 | 3 | 3 | 3 |
| (+) D&A | 110 | 109 | 128 | 145 | 160 | 164 |
| EBITDA | 309 | 331 | 375 | 421 | 467 | 479 |
| (−) Tax | 41 | 46 | 51 | 57 | 63 | — |
| (−) CapEx | 145 | 161 | 180 | 200 | 223 | — |
| (−) ΔWC | 425 | 133 | 148 | 166 | 184 | — |
| Free Cash Flow (FCF) | -302 | -10 | -4 | -2 | -4 | — |
| Peers' EBITDA Multiple | 14.3x | |||||
| Terminal Value | 6,847 | |||||
| WACC / Discount Rate | 8.00% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | -291 | -8 | -4 | -2 | -3 | 4,659 |
| Enterprise Value | 4,352 | |||||
| Projection Period | -307 | -7.1% | ||||
| Terminal Value | 4,659 | 107.1% | ||||
| (−) Current Net Debt | (346) | |||||
| Equity Value | 4,698 | |||||
| (÷) Outstanding Shares | 53M | |||||
| Fair Price | $89 | -63.5% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.3x | 12.3x | 14.3x | 16.3x | 18.3x |
|---|---|---|---|---|---|
| 6.0% | $71 | $84 | $98 | $111 | $125 |
| 7.0% | $67 | $80 | $93 | $106 | $119 |
| 8.0% | $64 | $77 | $89 | $102 | $114 |
| 9.0% | $62 | $73 | $85 | $97 | $109 |
| 10.0% | $59 | $70 | $81 | $93 | $104 |
Current price: $244.07. 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.