Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Lam Research Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 21.5% to 6.0% 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 71, DPO 31, DIO 165). At a 9.3% WACC with mid-year discounting, the terminal value (87% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 23.0x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $158.10 per share, suggesting LRCX is overvalued by 25.9% at the current price of $213.32.
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 | 6,573 | 8,191 | 9,087 | 9,820 | 10,405 | 10,665 |
| (−) Net Interest | 259 | 322 | 358 | 387 | 410 | 420 |
| (+) D&A | 511 | 577 | 638 | 726 | 850 | 871 |
| EBITDA | 7,342 | 9,090 | 10,082 | 10,932 | 11,664 | 11,956 |
| (−) Tax | 735 | 916 | 1,016 | 1,098 | 1,163 | — |
| (−) CapEx | 681 | 849 | 942 | 1,018 | 1,079 | — |
| (−) ΔWC | 1,916 | 2,153 | 1,192 | 975 | 779 | — |
| Free Cash Flow (FCF) | 4,010 | 5,173 | 6,932 | 7,841 | 8,644 | — |
| Peers' EBITDA Multiple | 23.0x | |||||
| Terminal Value | 275,341 | |||||
| WACC / Discount Rate | 9.26% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 3,837 | 4,529 | 5,556 | 5,752 | 5,804 | 176,870 |
| Enterprise Value | 202,348 | |||||
| Projection Period | 25,478 | 12.6% | ||||
| Terminal Value | 176,870 | 87.4% | ||||
| (−) Current Net Debt | (1,634) | |||||
| Equity Value | 203,983 | |||||
| (÷) Outstanding Shares | 1290M | |||||
| Fair Price | $158 | -25.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 19.0x | 21.0x | 23.0x | 25.0x | 27.0x |
|---|---|---|---|---|---|
| 7.3% | $146 | $159 | $172 | $185 | $198 |
| 8.3% | $140 | $153 | $165 | $178 | $190 |
| 9.3% | $134 | $146 | $158 | $170 | $182 |
| 10.3% | $129 | $140 | $152 | $163 | $174 |
| 11.3% | $124 | $134 | $145 | $156 | $167 |
Current price: $213.32. 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.