Using an unlevered Free Cash Flow to Firm (FCFF) model, we project PayPal Holdings, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 2.9% to 6.5% 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 561, DPO 992, DIO 60). At a 7.5% WACC with mid-year discounting, the terminal value (80% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $145.64 per share, suggesting PYPL is undervalued by 223.0% at the current price of $45.09.
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 | 7,719 | 8,050 | 8,430 | 9,313 | 9,918 | 10,166 |
| (−) Net Interest | 390 | 407 | 426 | 471 | 501 | 514 |
| (+) D&A | 754 | 750 | 793 | 862 | 938 | 962 |
| EBITDA | 8,864 | 9,207 | 9,649 | 10,645 | 11,358 | 11,642 |
| (−) Tax | 1,343 | 1,400 | 1,466 | 1,620 | 1,725 | — |
| (−) CapEx | 884 | 922 | 966 | 1,067 | 1,136 | — |
| (−) ΔWC | 761 | 336 | 385 | 896 | 614 | — |
| Free Cash Flow (FCF) | 5,876 | 6,548 | 6,832 | 7,063 | 7,882 | — |
| Peers' EBITDA Multiple | 14.1x | |||||
| Terminal Value | 164,500 | |||||
| WACC / Discount Rate | 7.51% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 5,667 | 5,874 | 5,701 | 5,482 | 5,691 | 114,540 |
| Enterprise Value | 142,954 | |||||
| Projection Period | 28,414 | 19.9% | ||||
| Terminal Value | 114,540 | 80.1% | ||||
| (−) Current Net Debt | 1,938 | |||||
| Equity Value | 141,016 | |||||
| (÷) Outstanding Shares | 968M | |||||
| Fair Price | $146 | +223.1% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.1x | 12.1x | 14.1x | 16.1x | 18.1x |
|---|---|---|---|---|---|
| 5.5% | $122 | $140 | $159 | $177 | $195 |
| 6.5% | $117 | $134 | $152 | $170 | $187 |
| 7.5% | $112 | $129 | $146 | $162 | $179 |
| 8.5% | $108 | $124 | $140 | $156 | $172 |
| 9.5% | $103 | $119 | $134 | $149 | $164 |
Current price: $45.09. 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.