Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Norfolk Southern Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 2.5% 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 32, DPO 51, DIO 11). At a 8.3% WACC with mid-year discounting, the terminal value (85% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.8x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $356.71 per share, suggesting NSC is undervalued by 26.2% at the current price of $282.65.
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 | 3,500 | 3,667 | 3,847 | 4,074 | 4,287 | 4,394 |
| (−) Net Interest | 757 | 793 | 832 | 881 | 927 | 950 |
| (+) D&A | 2,070 | 2,203 | 2,261 | 2,261 | 2,281 | 2,338 |
| EBITDA | 6,327 | 6,663 | 6,940 | 7,216 | 7,495 | 7,683 |
| (−) Tax | 752 | 788 | 827 | 875 | 921 | — |
| (−) CapEx | 2,135 | 2,237 | 2,347 | 2,485 | 2,615 | — |
| (−) ΔWC | 1,074 | 10 | 10 | 13 | 12 | — |
| Free Cash Flow (FCF) | 2,366 | 3,629 | 3,757 | 3,843 | 3,947 | — |
| Peers' EBITDA Multiple | 15.8x | |||||
| Terminal Value | 121,389 | |||||
| WACC / Discount Rate | 8.29% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,274 | 3,220 | 3,078 | 2,907 | 2,758 | 81,499 |
| Enterprise Value | 95,737 | |||||
| Projection Period | 14,238 | 14.9% | ||||
| Terminal Value | 81,499 | 85.1% | ||||
| (−) Current Net Debt | 15,557 | |||||
| Equity Value | 80,180 | |||||
| (÷) Outstanding Shares | 225M | |||||
| Fair Price | $357 | +26.2% | ||||
| WACC \ EV/EBITDA Exit Multiple | 11.8x | 13.8x | 15.8x | 17.8x | 19.8x |
|---|---|---|---|---|---|
| 6.3% | $294 | $345 | $395 | $446 | $496 |
| 7.3% | $279 | $327 | $375 | $424 | $472 |
| 8.3% | $265 | $311 | $357 | $403 | $448 |
| 9.3% | $251 | $295 | $339 | $383 | $427 |
| 10.3% | $238 | $280 | $322 | $364 | $406 |
Current price: $282.65. 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.