Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Lennox International Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 5.6% 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 44, DPO 46, DIO 82). At a 8.3% WACC with mid-year discounting, the terminal value (80% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.4x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $420.44 per share, suggesting LII is fairly valued by 5.4% at the current price of $444.24.
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 | 879 | 924 | 970 | 1,010 | 1,125 | 1,153 |
| (−) Net Interest | 46 | 48 | 51 | 53 | 59 | 60 |
| (+) D&A | 148 | 160 | 174 | 161 | 166 | 170 |
| EBITDA | 1,073 | 1,132 | 1,195 | 1,223 | 1,349 | 1,383 |
| (−) Tax | 166 | 174 | 183 | 190 | 212 | — |
| (−) CapEx | 165 | 174 | 182 | 190 | 211 | — |
| (−) ΔWC | -256 | 53 | 54 | 47 | 136 | — |
| Free Cash Flow (FCF) | 998 | 731 | 775 | 796 | 790 | — |
| Peers' EBITDA Multiple | 14.4x | |||||
| Terminal Value | 19,988 | |||||
| WACC / Discount Rate | 8.34% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 959 | 649 | 635 | 601 | 551 | 13,389 |
| Enterprise Value | 16,784 | |||||
| Projection Period | 3,395 | 20.2% | ||||
| Terminal Value | 13,389 | 79.8% | ||||
| (−) Current Net Debt | 2,030 | |||||
| Equity Value | 14,754 | |||||
| (÷) Outstanding Shares | 35M | |||||
| Fair Price | $420 | -5.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.5x | 12.5x | 14.5x | 16.5x | 18.5x |
|---|---|---|---|---|---|
| 6.3% | $346 | $404 | $462 | $520 | $578 |
| 7.3% | $330 | $385 | $441 | $496 | $551 |
| 8.3% | $315 | $368 | $420 | $473 | $526 |
| 9.3% | $300 | $351 | $401 | $452 | $502 |
| 10.3% | $287 | $335 | $383 | $431 | $480 |
Current price: $444.24. 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.