Using an unlevered Free Cash Flow to Firm (FCFF) model, we project The Charles Schwab Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from -4.3% to 5.9% 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 1353, DPO 28087, DIO 60). At a 8.4% WACC with mid-year discounting, the terminal value (54% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 23.5x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $368.57 per share, suggesting SCHW is undervalued by 289.4% at the current price of $94.64.
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 | 12,469 | 13,650 | 14,841 | 16,042 | 16,989 | 17,413 |
| (−) Net Interest | 3,906 | 4,276 | 4,650 | 5,026 | 5,322 | 5,455 |
| (+) D&A | 751 | 740 | 735 | 800 | 898 | 920 |
| EBITDA | 17,126 | 18,666 | 20,226 | 21,867 | 23,209 | 23,789 |
| (−) Tax | 2,834 | 3,102 | 3,373 | 3,646 | 3,861 | — |
| (−) CapEx | 862 | 944 | 1,026 | 1,109 | 1,175 | — |
| (−) ΔWC | -192,369 | -21,487 | -21,678 | -21,835 | -17,230 | — |
| Free Cash Flow (FCF) | 205,800 | 36,107 | 37,505 | 38,947 | 35,403 | — |
| Peers' EBITDA Multiple | 23.5x | |||||
| Terminal Value | 558,329 | |||||
| WACC / Discount Rate | 8.44% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 197,631 | 31,976 | 30,630 | 29,333 | 24,589 | 372,393 |
| Enterprise Value | 686,553 | |||||
| Projection Period | 314,159 | 45.8% | ||||
| Terminal Value | 372,393 | 54.2% | ||||
| (−) Current Net Debt | 31,573 | |||||
| Equity Value | 654,980 | |||||
| (÷) Outstanding Shares | 1777M | |||||
| Fair Price | $369 | +289.5% | ||||
| WACC \ EV/EBITDA Exit Multiple | 19.5x | 21.5x | 23.5x | 25.5x | 27.5x |
|---|---|---|---|---|---|
| 6.4% | $355 | $374 | $394 | $413 | $433 |
| 7.4% | $343 | $362 | $381 | $400 | $418 |
| 8.4% | $333 | $351 | $369 | $386 | $404 |
| 9.4% | $323 | $340 | $357 | $374 | $391 |
| 10.4% | $313 | $330 | $346 | $362 | $378 |
Current price: $94.64. 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.