Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Palo Alto Networks, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 22.2% to 12.1% 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 141, DPO 25, DIO 60). At a 9.3% WACC with mid-year discounting, the terminal value (119% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 21.2x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $19.15 per share, suggesting PANW is overvalued by 87.8% at the current price of $156.57.
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 | 274 | 329 | 375 | 412 | 462 | 474 |
| (−) Net Interest | 110 | 131 | 150 | 165 | 185 | 189 |
| (+) D&A | 172 | 207 | 238 | 289 | 346 | 354 |
| EBITDA | 556 | 667 | 764 | 866 | 992 | 1,017 |
| (−) Tax | 0 | 0 | 0 | 0 | 0 | — |
| (−) CapEx | 292 | 350 | 400 | 439 | 492 | — |
| (−) ΔWC | 1,212 | 920 | 790 | 628 | 845 | — |
| Free Cash Flow (FCF) | -948 | -604 | -427 | -202 | -345 | — |
| Peers' EBITDA Multiple | 21.2x | |||||
| Terminal Value | 21,521 | |||||
| WACC / Discount Rate | 9.29% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | -907 | -528 | -342 | -148 | -232 | 13,805 |
| Enterprise Value | 11,649 | |||||
| Projection Period | -2,157 | -18.5% | ||||
| Terminal Value | 13,805 | 118.5% | ||||
| (−) Current Net Debt | (1,930) | |||||
| Equity Value | 13,579 | |||||
| (÷) Outstanding Shares | 709M | |||||
| Fair Price | $19 | -87.8% | ||||
| WACC \ EV/EBITDA Exit Multiple | 17.2x | 19.2x | 21.2x | 23.2x | 25.2x |
|---|---|---|---|---|---|
| 7.3% | $17 | $19 | $21 | $23 | $25 |
| 8.3% | $16 | $18 | $20 | $22 | $24 |
| 9.3% | $15 | $17 | $19 | $21 | $23 |
| 10.3% | $15 | $17 | $18 | $20 | $22 |
| 11.3% | $14 | $16 | $18 | $19 | $21 |
Current price: $156.57. 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.