AbbVie Inc.ABBVNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $314.11 per share(market-calibrated)

+34.1%

Upside to Fair Value

Current

$234.26

Pure Model

$341.45

Fair Value

$314.11

Bull Case

$426.74

Bear Case

$261.64

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

1.06%

Calibrated Growth

2.51%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $341.45.

What's Driving This Ratingfor ABBV

✓

CapEx already efficient

CapEx at 1.45% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 19.35% — below the sector mature average of 34.69%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $18.7B (19.79% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 9.77% in Year 1 to 1.73% by Year 5 (per analyst consensus). That's below the 3.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

🎯

Market pricing in lower growth than model

The market implies only 1.06% perpetual growth — 194bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.13% indicates efficient cash generation. FCF reaches $24.5B by Year 10 (25.91% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.33

Market Risk Premium4.50%

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

Cost of Equity (Re)6.00%

Cost of Debt

Pre-tax Cost of Debt3.57%

Tax Rate30.00%

After-tax Cost of Debt2.50%

Equity Weight (E/V)85.86%

Debt Weight (D/V)14.14%

WACC Calculation

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

WACC = (85.86% × 6.00%) + (14.14% × 2.50%)

= 5.51%

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	$67.1B	$77.9B	$83.6B	$87.2B	$94.6B
EBIT	$13.0B	$15.1B	$16.2B	$17.1B	$18.7B
Tax	$3.9B	$4.5B	$4.9B	$5.1B	$5.6B
NOPAT	$9.1B	$10.6B	$11.3B	$12.0B	$13.1B
+ Depreciation	$9.3B	$10.8B	$11.5B	$12.0B	$13.1B
- Capex	$976M	$1.1B	$1.2B	$1.3B	$1.4B
- Δ NWC	$598M	$532M	$142M	$191M	$275M
Free Cash Flow	$16.8B	$19.6B	$21.5B	$22.5B	$24.5B
Discount Factor	0.948	0.851	0.765	0.687	0.585
Present Value	$15.9B	$16.7B	$16.5B	$15.5B	$14.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$24.5B

Terminal Growth Rate3.00%

WACC5.51%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.0T

PV of Terminal Value$588.9B

Exit Multiple Method

Year 10 EBITDA$31.8B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$762.4B

PV of Terminal Value$446.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$157.8B

PV of Terminal Value$588.9B

Enterprise Value$746.7B

(-) Net Debt$63.8B

Equity Value$682.9B

Shares Outstanding1.8B

Price per Share$381.34

Exit Multiple Method

PV of Projected FCFs$157.8B

PV of Terminal Value$446.0B

Enterprise Value$603.8B

(-) Net Debt$63.8B

Equity Value$540.0B

Shares Outstanding1.8B

Price per Share$301.56

Pure Model Fair Value

$341.45

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%
3.51%	$439.17	$420.03	$401.79	$384.40	$367.83
4.51%	$373.23	$418.94	$401.79	$384.40	$367.83
5.51%	$293.42	$313.44	$341.45	$383.41	$367.83
6.51%	$243.90	$254.64	$268.44	$286.83	$312.56
7.51%	$208.78	$215.25	$223.15	$233.02	$245.71

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

$261.64

11.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.42

Base Case

$341.45

45.8% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.33

Bull Case

$426.74

82.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.30

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.77%

Year 3 Revenue Growth7.33%

Year 5 Revenue Growth1.73%

Year 7 Revenue Growth2.24%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin19.35%

Terminal EBIT Margin34.69%

Tax Rate30.00%

Historical Capex / Rev1.45%

NWC / Revenue10.00%

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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