Agilent Technologies, Inc.ANYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $113.42 per share(market-calibrated)

-4.7%

Upside to Fair Value

Current

$119.04

Pure Model

$111.79

Fair Value

$113.42

Bull Case

$139.54

Bear Case

$86.55

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

5.47%

Calibrated Growth

3.37%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $111.79.

What's Driving This Ratingfor A

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.50% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$112M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 22.81% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 6.36% revenue growth, fading to 3.00% by Year 10. Revenue reaches $11.2B (vs $6.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $86.47/share (15.5x terminal FCF) while exit multiple gives $137.12/share (30.8x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $119.04, the market implies 5.47% perpetual growth — 247bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.90% indicates efficient cash generation. FCF reaches $2.4B by Year 10 (21.03% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.30

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.34%

Cost of Debt

Pre-tax Cost of Debt2.79%

Tax Rate9.20%

After-tax Cost of Debt2.53%

Equity Weight (E/V)90.95%

Debt Weight (D/V)9.05%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (90.95% × 10.34%) + (9.05% × 2.53%)

= 9.63%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$7.4B	$8.3B	$9.3B	$10.1B	$11.2B
EBIT	$1.7B	$1.9B	$2.1B	$2.3B	$2.6B
Tax	$155M	$175M	$194M	$212M	$235M
NOPAT	$1.5B	$1.7B	$1.9B	$2.1B	$2.3B
+ Depreciation	$309M	$349M	$387M	$423M	$468M
- Capex	$332M	$357M	$375M	$388M	$392M
- Δ NWC	$56M	$63M	$57M	$53M	$41M
Free Cash Flow	$1.5B	$1.7B	$1.9B	$2.1B	$2.4B
Discount Factor	0.912	0.759	0.631	0.525	0.399
Present Value	$1.3B	$1.3B	$1.2B	$1.1B	$938M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.4B

Terminal Growth Rate3.00%

WACC9.63%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$36.5B

PV of Terminal Value$14.6B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$72.5B

PV of Terminal Value$28.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.5B

PV of Terminal Value$14.6B

Enterprise Value$26.0B

(-) Net Debt$1.6B

Equity Value$24.5B

Shares Outstanding283M

Price per Share$86.47

Exit Multiple Method

PV of Projected FCFs$11.5B

PV of Terminal Value$28.9B

Enterprise Value$40.4B

(-) Net Debt$1.6B

Equity Value$38.8B

Shares Outstanding283M

Price per Share$137.12

Pure Model Fair Value

$111.79

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.63%	$136.58	$140.28	$144.79	$150.39	$157.52
8.63%	$120.88	$123.30	$126.16	$129.57	$133.71
9.63%	$108.21	$109.88	$111.79	$114.03	$116.65
10.63%	$97.66	$98.85	$100.20	$101.74	$103.50
11.63%	$88.68	$89.56	$90.54	$91.64	$92.88

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$86.55

-27.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.62

Base Case

$111.79

-6.1% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.30

Bull Case

$139.54

17.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.10

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.36%

Year 3 Revenue Growth6.38%

Year 5 Revenue Growth5.17%

Year 7 Revenue Growth4.30%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin22.81%

Tax Rate9.20%

Historical Capex / Rev4.50%

Terminal Capex / Rev3.50%

NWC / Revenue12.63%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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