Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Trane Technologies plc's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 8.8% to 10.8% 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 62, DPO 64, DIO 61). At a 8.8% WACC with mid-year discounting, the terminal value (84% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 17.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $328.23 per share, suggesting TT is overvalued by 20.0% at the current price of $410.12.
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 | 3,300 | 3,558 | 3,819 | 4,232 | 4,690 | 4,807 |
| (−) Net Interest | 308 | 332 | 357 | 395 | 438 | 449 |
| (+) D&A | 314 | 351 | 380 | 414 | 444 | 455 |
| EBITDA | 3,922 | 4,241 | 4,555 | 5,041 | 5,572 | 5,711 |
| (−) Tax | 620 | 668 | 717 | 795 | 881 | — |
| (−) CapEx | 407 | 439 | 471 | 522 | 578 | — |
| (−) ΔWC | 629 | 299 | 301 | 478 | 529 | — |
| Free Cash Flow (FCF) | 2,267 | 2,836 | 3,066 | 3,247 | 3,584 | — |
| Peers' EBITDA Multiple | 17.1x | |||||
| Terminal Value | 97,893 | |||||
| WACC / Discount Rate | 8.79% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,173 | 2,499 | 2,484 | 2,418 | 2,453 | 64,231 |
| Enterprise Value | 76,257 | |||||
| Projection Period | 12,026 | 15.8% | ||||
| Terminal Value | 64,231 | 84.2% | ||||
| (−) Current Net Debt | 2,852 | |||||
| Equity Value | 73,405 | |||||
| (÷) Outstanding Shares | 224M | |||||
| Fair Price | $328 | -20.0% | ||||
| WACC \ EV/EBITDA Exit Multiple | 13.1x | 15.1x | 17.1x | 19.1x | 21.1x |
|---|---|---|---|---|---|
| 6.8% | $285 | $322 | $359 | $396 | $432 |
| 7.8% | $273 | $308 | $343 | $378 | $413 |
| 8.8% | $261 | $295 | $328 | $362 | $395 |
| 9.8% | $250 | $282 | $314 | $346 | $378 |
| 10.8% | $240 | $270 | $301 | $331 | $362 |
Current price: $410.12. 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.