Using an unlevered Free Cash Flow to Firm (FCFF) model, we project The Home Depot, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 2.2% to 3.5% 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 10, DPO 41, DIO 82). At a 8.0% WACC with mid-year discounting, the terminal value (80% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.9x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $386.52 per share, suggesting HD is undervalued by 16.2% at the current price of $332.51.
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 | 24,756 | 25,183 | 26,242 | 27,445 | 28,393 | 29,103 |
| (−) Net Interest | 2,056 | 2,092 | 2,180 | 2,280 | 2,358 | 2,417 |
| (+) D&A | 3,215 | 3,389 | 3,464 | 3,548 | 3,612 | 3,703 |
| EBITDA | 30,027 | 30,664 | 31,886 | 33,272 | 34,364 | 35,223 |
| (−) Tax | 5,937 | 6,039 | 6,293 | 6,581 | 6,809 | — |
| (−) CapEx | 3,436 | 3,495 | 3,642 | 3,809 | 3,941 | — |
| (−) ΔWC | -2,737 | 297 | 735 | 835 | 658 | — |
| Free Cash Flow (FCF) | 23,391 | 20,833 | 21,216 | 22,047 | 22,956 | — |
| Peers' EBITDA Multiple | 14.9x | |||||
| Terminal Value | 525,176 | |||||
| WACC / Discount Rate | 7.99% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 22,509 | 18,564 | 17,507 | 16,846 | 16,243 | 357,595 |
| Enterprise Value | 449,265 | |||||
| Projection Period | 91,670 | 20.4% | ||||
| Terminal Value | 357,595 | 79.6% | ||||
| (−) Current Net Debt | 63,961 | |||||
| Equity Value | 385,304 | |||||
| (÷) Outstanding Shares | 997M | |||||
| Fair Price | $386 | +16.2% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.9x | 12.9x | 14.9x | 16.9x | 18.9x |
|---|---|---|---|---|---|
| 6.0% | $320 | $373 | $426 | $479 | $531 |
| 7.0% | $305 | $355 | $406 | $456 | $506 |
| 8.0% | $290 | $338 | $387 | $435 | $483 |
| 9.0% | $277 | $322 | $368 | $414 | $460 |
| 10.0% | $263 | $307 | $351 | $395 | $439 |
Current price: $332.51. 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.