Using an unlevered Free Cash Flow to Firm (FCFF) model, we project T. Rowe Price Group, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 5.1% to -1.2% 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 44, DPO 47, DIO 60). At a 7.9% WACC with mid-year discounting, the terminal value (78% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 13.7x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $198.03 per share, suggesting TROW is undervalued by 118.2% at the current price of $90.77.
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 | 2,687 | 2,746 | 2,803 | 2,953 | 2,918 | 2,991 |
| (−) Net Interest | 154 | 157 | 160 | 169 | 167 | 171 |
| (+) D&A | 296 | 314 | 333 | 340 | 327 | 335 |
| EBITDA | 3,137 | 3,217 | 3,297 | 3,462 | 3,412 | 3,497 |
| (−) Tax | 654 | 669 | 683 | 719 | 711 | — |
| (−) CapEx | 327 | 334 | 341 | 359 | 355 | — |
| (−) ΔWC | 332 | 23 | 22 | 58 | -14 | — |
| Free Cash Flow (FCF) | 1,823 | 2,191 | 2,251 | 2,325 | 2,360 | — |
| Peers' EBITDA Multiple | 13.7x | |||||
| Terminal Value | 47,984 | |||||
| WACC / Discount Rate | 7.93% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,755 | 1,954 | 1,860 | 1,780 | 1,674 | 32,768 |
| Enterprise Value | 41,792 | |||||
| Projection Period | 9,024 | 21.6% | ||||
| Terminal Value | 32,768 | 78.4% | ||||
| (−) Current Net Debt | (2,518) | |||||
| Equity Value | 44,310 | |||||
| (÷) Outstanding Shares | 224M | |||||
| Fair Price | $198 | +118.2% | ||||
| WACC \ EV/EBITDA Exit Multiple | 9.7x | 11.7x | 13.7x | 15.7x | 17.7x |
|---|---|---|---|---|---|
| 5.9% | $167 | $191 | $214 | $238 | $261 |
| 6.9% | $161 | $184 | $206 | $228 | $251 |
| 7.9% | $155 | $177 | $198 | $219 | $241 |
| 8.9% | $150 | $170 | $191 | $211 | $231 |
| 9.9% | $144 | $164 | $183 | $203 | $222 |
Current price: $90.77. 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.