Using an unlevered Free Cash Flow to Firm (FCFF) model, we project The Progressive Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 1.7% to 16.4% 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 98, DPO 54, DIO 60). At a 8.0% WACC with mid-year discounting, the terminal value (78% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 8.8x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $330.09 per share, suggesting PGR is undervalued by 61.8% at the current price of $203.99.
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 | 15,327 | 16,467 | 17,469 | 20,341 | 23,685 | 24,277 |
| (−) Net Interest | 369 | 396 | 420 | 490 | 570 | 584 |
| (+) D&A | 284 | 317 | 346 | 388 | 439 | 450 |
| EBITDA | 15,980 | 17,180 | 18,236 | 21,219 | 24,694 | 25,311 |
| (−) Tax | 3,183 | 3,420 | 3,628 | 4,225 | 4,919 | — |
| (−) CapEx | 407 | 437 | 463 | 540 | 628 | — |
| (−) ΔWC | 8,676 | 1,865 | 1,639 | 4,696 | 5,468 | — |
| Free Cash Flow (FCF) | 3,714 | 11,458 | 12,505 | 11,759 | 13,679 | — |
| Peers' EBITDA Multiple | 8.8x | |||||
| Terminal Value | 222,485 | |||||
| WACC / Discount Rate | 8.00% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 3,573 | 10,209 | 10,315 | 8,981 | 9,673 | 151,395 |
| Enterprise Value | 194,147 | |||||
| Projection Period | 42,752 | 22.0% | ||||
| Terminal Value | 151,395 | 78.0% | ||||
| (−) Current Net Debt | 0 | |||||
| Equity Value | 194,147 | |||||
| (÷) Outstanding Shares | 588M | |||||
| Fair Price | $330 | +61.8% | ||||
| WACC \ EV/EBITDA Exit Multiple | 4.8x | 6.8x | 8.8x | 10.8x | 12.8x |
|---|---|---|---|---|---|
| 6.0% | $231 | $295 | $359 | $423 | $488 |
| 7.0% | $222 | $283 | $344 | $406 | $467 |
| 8.0% | $213 | $272 | $330 | $389 | $447 |
| 9.0% | $205 | $261 | $317 | $373 | $429 |
| 10.0% | $197 | $251 | $304 | $357 | $411 |
Current price: $203.99. 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.