Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Ralph Lauren Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 12.6% to 5.1% 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 35, DPO 70, DIO 166). At a 8.0% WACC with mid-year discounting, the terminal value (81% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 11.4x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $196.56 per share, suggesting RL is overvalued by 41.9% at the current price of $338.19.
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 | 841 | 890 | 928 | 990 | 1,040 | 1,066 |
| (−) Net Interest | 61 | 65 | 68 | 72 | 76 | 78 |
| (+) D&A | 175 | 198 | 212 | 218 | 238 | 244 |
| EBITDA | 1,077 | 1,153 | 1,208 | 1,280 | 1,354 | 1,388 |
| (−) Tax | 176 | 186 | 194 | 207 | 218 | — |
| (−) CapEx | 224 | 237 | 247 | 264 | 277 | — |
| (−) ΔWC | 344 | 85 | 67 | 107 | 89 | — |
| Free Cash Flow (FCF) | 334 | 644 | 699 | 702 | 771 | — |
| Peers' EBITDA Multiple | 11.4x | |||||
| Terminal Value | 15,836 | |||||
| WACC / Discount Rate | 8.01% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 321 | 574 | 577 | 536 | 545 | 10,774 |
| Enterprise Value | 13,327 | |||||
| Projection Period | 2,553 | 19.2% | ||||
| Terminal Value | 10,774 | 80.8% | ||||
| (−) Current Net Debt | 746 | |||||
| Equity Value | 12,582 | |||||
| (÷) Outstanding Shares | 64M | |||||
| Fair Price | $197 | -41.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 7.4x | 9.4x | 11.4x | 13.4x | 15.4x |
|---|---|---|---|---|---|
| 6.0% | $150 | $183 | $215 | $247 | $280 |
| 7.0% | $144 | $175 | $206 | $236 | $267 |
| 8.0% | $138 | $167 | $197 | $226 | $256 |
| 9.0% | $132 | $160 | $188 | $216 | $244 |
| 10.0% | $126 | $153 | $180 | $207 | $234 |
Current price: $338.19. 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.