Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Northrop Grumman Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 4.7% to 7.2% 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 74, DPO 30, DIO 13). At a 8.3% WACC with mid-year discounting, the terminal value (88% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 20.2x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $742.37 per share, suggesting NOC is fairly valued by 7.0% at the current price of $694.05.
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 | 3,967 | 4,214 | 4,439 | 4,686 | 5,025 | 5,151 |
| (−) Net Interest | 652 | 693 | 730 | 770 | 826 | 847 |
| (+) D&A | 1,568 | 1,640 | 1,729 | 1,770 | 1,835 | 1,881 |
| EBITDA | 6,188 | 6,546 | 6,898 | 7,227 | 7,687 | 7,879 |
| (−) Tax | 669 | 711 | 749 | 791 | 848 | — |
| (−) CapEx | 1,771 | 1,881 | 1,982 | 2,092 | 2,244 | — |
| (−) ΔWC | 345 | 451 | 412 | 452 | 620 | — |
| Free Cash Flow (FCF) | 3,402 | 3,503 | 3,755 | 3,892 | 3,975 | — |
| Peers' EBITDA Multiple | 20.2x | |||||
| Terminal Value | 159,310 | |||||
| WACC / Discount Rate | 8.30% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 3,269 | 3,108 | 3,076 | 2,944 | 2,776 | 106,909 |
| Enterprise Value | 122,082 | |||||
| Projection Period | 15,173 | 12.4% | ||||
| Terminal Value | 106,909 | 87.6% | ||||
| (−) Current Net Debt | 15,338 | |||||
| Equity Value | 106,744 | |||||
| (÷) Outstanding Shares | 144M | |||||
| Fair Price | $742 | +7.0% | ||||
| WACC \ EV/EBITDA Exit Multiple | 16.2x | 18.2x | 20.2x | 22.2x | 24.2x |
|---|---|---|---|---|---|
| 6.3% | $658 | $739 | $820 | $901 | $981 |
| 7.3% | $626 | $703 | $780 | $857 | $934 |
| 8.3% | $595 | $669 | $742 | $816 | $889 |
| 9.3% | $566 | $636 | $707 | $777 | $847 |
| 10.3% | $539 | $606 | $673 | $740 | $807 |
Current price: $694.05. 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.