Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Alphabet Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 16.7% to 11.4% 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 55, DPO 21, DIO 6). At a 8.1% WACC with mid-year discounting, the terminal value (90% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 21.8x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $415.80 per share, suggesting GOOGL is undervalued by 42.9% at the current price of $290.93.
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 | 139,297 | 160,176 | 182,030 | 201,171 | 224,147 | 229,750 |
| (−) Net Interest | 445 | 511 | 581 | 642 | 715 | 733 |
| (+) D&A | 46,472 | 54,500 | 63,102 | 73,584 | 81,789 | 83,833 |
| EBITDA | 186,213 | 215,187 | 245,714 | 275,397 | 306,651 | 314,317 |
| (−) Tax | 22,080 | 25,389 | 28,853 | 31,887 | 35,529 | — |
| (−) CapEx | 64,784 | 74,494 | 84,658 | 93,560 | 104,246 | — |
| (−) ΔWC | 11,926 | 9,385 | 9,823 | 8,603 | 10,327 | — |
| Free Cash Flow (FCF) | 87,423 | 105,919 | 122,378 | 141,346 | 156,549 | — |
| Peers' EBITDA Multiple | 21.8x | |||||
| Terminal Value | 6,845,826 | |||||
| WACC / Discount Rate | 8.13% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 84,070 | 94,195 | 100,645 | 107,499 | 110,104 | 4,630,187 |
| Enterprise Value | 5,126,700 | |||||
| Projection Period | 496,513 | 9.7% | ||||
| Terminal Value | 4,630,187 | 90.3% | ||||
| (−) Current Net Debt | 41,327 | |||||
| Equity Value | 5,085,373 | |||||
| (÷) Outstanding Shares | 12230M | |||||
| Fair Price | $416 | +42.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 17.8x | 19.8x | 21.8x | 23.8x | 25.8x |
|---|---|---|---|---|---|
| 6.1% | $379 | $417 | $455 | $493 | $531 |
| 7.1% | $362 | $398 | $435 | $471 | $508 |
| 8.1% | $346 | $381 | $416 | $451 | $485 |
| 9.1% | $331 | $365 | $398 | $431 | $464 |
| 10.1% | $317 | $349 | $381 | $412 | $444 |
Current price: $290.93. 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.