Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Microchip Technology Incorporated's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 6.0% to -5.2% 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 59, DPO 44, DIO 170). At a 8.6% WACC with mid-year discounting, the terminal value (89% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 30.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $105.38 per share, suggesting MCHP is undervalued by 62.4% at the current price of $64.88.
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 | 1,498 | 1,836 | 2,176 | 2,310 | 2,191 | 2,246 |
| (−) Net Interest | 196 | 241 | 285 | 303 | 287 | 294 |
| (+) D&A | 272 | 290 | 260 | 216 | 215 | 220 |
| EBITDA | 1,967 | 2,366 | 2,722 | 2,829 | 2,693 | 2,761 |
| (−) Tax | 462 | 566 | 671 | 712 | 676 | — |
| (−) CapEx | 182 | 223 | 264 | 280 | 266 | — |
| (−) ΔWC | -477 | 303 | 306 | 120 | -107 | — |
| Free Cash Flow (FCF) | 1,800 | 1,275 | 1,481 | 1,716 | 1,859 | — |
| Peers' EBITDA Multiple | 30.1x | |||||
| Terminal Value | 82,962 | |||||
| WACC / Discount Rate | 8.61% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,727 | 1,126 | 1,205 | 1,285 | 1,282 | 54,889 |
| Enterprise Value | 61,515 | |||||
| Projection Period | 6,625 | 10.8% | ||||
| Terminal Value | 54,889 | 89.2% | ||||
| (−) Current Net Debt | 4,894 | |||||
| Equity Value | 56,620 | |||||
| (÷) Outstanding Shares | 537M | |||||
| Fair Price | $105 | +62.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 26.0x | 28.0x | 30.0x | 32.0x | 34.0x |
|---|---|---|---|---|---|
| 6.6% | $101 | $108 | $116 | $123 | $131 |
| 7.6% | $96 | $103 | $110 | $118 | $125 |
| 8.6% | $92 | $99 | $105 | $112 | $119 |
| 9.6% | $88 | $94 | $101 | $107 | $114 |
| 10.6% | $84 | $90 | $96 | $102 | $108 |
Current price: $64.88. 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.