Using an unlevered Free Cash Flow to Firm (FCFF) model, we project W.W. Grainger, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 5.5% to 8.3% 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 49, DPO 35, DIO 83). At a 8.6% WACC with mid-year discounting, the terminal value (86% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 18.5x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $1206.85 per share, suggesting GWW is fairly valued by 12.8% at the current price of $1069.61.
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 | 2,644 | 2,824 | 3,001 | 3,189 | 3,455 | 3,542 |
| (−) Net Interest | 104 | 111 | 118 | 125 | 136 | 139 |
| (+) D&A | 436 | 486 | 542 | 568 | 581 | 596 |
| EBITDA | 3,184 | 3,420 | 3,661 | 3,882 | 4,172 | 4,277 |
| (−) Tax | 647 | 691 | 734 | 780 | 845 | — |
| (−) CapEx | 504 | 538 | 572 | 608 | 658 | — |
| (−) ΔWC | 315 | 277 | 274 | 290 | 410 | — |
| Free Cash Flow (FCF) | 1,718 | 1,914 | 2,081 | 2,204 | 2,258 | — |
| Peers' EBITDA Multiple | 18.5x | |||||
| Terminal Value | 79,073 | |||||
| WACC / Discount Rate | 8.63% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,648 | 1,691 | 1,692 | 1,650 | 1,556 | 52,265 |
| Enterprise Value | 60,501 | |||||
| Projection Period | 8,237 | 13.6% | ||||
| Terminal Value | 52,265 | 86.4% | ||||
| (−) Current Net Debt | 2,578 | |||||
| Equity Value | 57,923 | |||||
| (÷) Outstanding Shares | 48M | |||||
| Fair Price | $1207 | +12.8% | ||||
| WACC \ EV/EBITDA Exit Multiple | 14.5x | 16.5x | 18.5x | 20.5x | 22.5x |
|---|---|---|---|---|---|
| 6.6% | $1063 | $1192 | $1321 | $1450 | $1579 |
| 7.6% | $1016 | $1139 | $1262 | $1386 | $1509 |
| 8.6% | $971 | $1089 | $1207 | $1325 | $1442 |
| 9.6% | $929 | $1042 | $1154 | $1267 | $1379 |
| 10.6% | $889 | $997 | $1104 | $1212 | $1319 |
Current price: $1069.61. 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.