Using an unlevered Free Cash Flow to Firm (FCFF) model, we project McKesson Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 13.8% to 7.4% 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 26, DPO 59, DIO 27). At a 7.6% WACC with mid-year discounting, the terminal value (84% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 17.6x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $945.56 per share, suggesting MCK is fairly valued by 8.9% at the current price of $868.43.
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 | 5,070 | 5,488 | 5,937 | 6,365 | 6,834 | 7,005 |
| (−) Net Interest | 325 | 352 | 381 | 408 | 438 | 449 |
| (+) D&A | 656 | 713 | 807 | 913 | 1,008 | 1,033 |
| EBITDA | 6,052 | 6,553 | 7,125 | 7,686 | 8,280 | 8,487 |
| (−) Tax | 1,132 | 1,225 | 1,325 | 1,421 | 1,525 | — |
| (−) CapEx | 927 | 1,004 | 1,086 | 1,164 | 1,250 | — |
| (−) ΔWC | 1,501 | -427 | -460 | -437 | -480 | — |
| Free Cash Flow (FCF) | 2,492 | 4,751 | 5,174 | 5,538 | 5,985 | — |
| Peers' EBITDA Multiple | 17.6x | |||||
| Terminal Value | 148,954 | |||||
| WACC / Discount Rate | 7.60% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,402 | 4,257 | 4,308 | 4,285 | 4,304 | 103,256 |
| Enterprise Value | 122,811 | |||||
| Projection Period | 19,555 | 15.9% | ||||
| Terminal Value | 103,256 | 84.1% | ||||
| (−) Current Net Debt | 1,699 | |||||
| Equity Value | 121,112 | |||||
| (÷) Outstanding Shares | 128M | |||||
| Fair Price | $945 | +8.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 13.6x | 15.6x | 17.6x | 19.6x | 21.6x |
|---|---|---|---|---|---|
| 5.6% | $831 | $932 | $1033 | $1134 | $1235 |
| 6.6% | $795 | $892 | $988 | $1084 | $1180 |
| 7.6% | $762 | $854 | $946 | $1037 | $1129 |
| 8.6% | $730 | $818 | $905 | $993 | $1081 |
| 9.6% | $700 | $784 | $867 | $951 | $1035 |
Current price: $868.43. 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.