Abbott LaboratoriesABTNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $155.66 per share(market-calibrated)

+36.4%

Upside to Fair Value

Current

$114.12

Pure Model

$158.71

Fair Value

$155.66

Bull Case

$203.26

Bear Case

$122.34

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

1.82%

Calibrated Growth

2.71%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $158.71.

What's Driving This Ratingfor ABT

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.62% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$886M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects 8.04% revenue growth, fading to 3.00% by Year 10. Revenue reaches $79.0B (vs $44.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $134.67/share (22.9x terminal FCF) while exit multiple gives $182.74/share (34.5x 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 lower growth than model

The market implies only 1.82% perpetual growth — 118bps 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 69.54% indicates efficient cash generation. FCF reaches $14.9B by Year 10 (18.87% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.75

Market Risk Premium4.50%

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

Cost of Equity (Re)7.88%

Cost of Debt

Pre-tax Cost of Debt3.14%

Tax Rate22.94%

After-tax Cost of Debt2.42%

Equity Weight (E/V)92.97%

Debt Weight (D/V)7.03%

WACC Calculation

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

WACC = (92.97% × 7.88%) + (7.03% × 2.42%)

= 7.50%

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	$47.9B	$55.2B	$62.8B	$70.6B	$79.0B
EBIT	$9.2B	$10.6B	$12.1B	$13.8B	$15.6B
Tax	$2.1B	$2.4B	$2.8B	$3.2B	$3.6B
NOPAT	$7.1B	$8.2B	$9.3B	$10.6B	$12.0B
+ Depreciation	$3.5B	$4.1B	$4.6B	$5.2B	$5.8B
- Capex	$2.2B	$2.4B	$2.6B	$2.7B	$2.8B
- Δ NWC	$290M	$301M	$344M	$301M	$187M
Free Cash Flow	$8.1B	$9.5B	$11.0B	$12.8B	$14.9B
Discount Factor	0.930	0.805	0.697	0.603	0.485
Present Value	$7.6B	$7.7B	$7.7B	$7.7B	$7.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$14.9B

Terminal Growth Rate3.00%

WACC7.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$341.6B

PV of Terminal Value$165.8B

Exit Multiple Method

Year 10 EBITDA$21.4B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$514.7B

PV of Terminal Value$249.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$76.0B

PV of Terminal Value$165.8B

Enterprise Value$241.8B

(-) Net Debt$6.5B

Equity Value$235.3B

Shares Outstanding1.7B

Price per Share$134.67

Exit Multiple Method

PV of Projected FCFs$76.0B

PV of Terminal Value$249.8B

Enterprise Value$325.8B

(-) Net Debt$6.5B

Equity Value$319.3B

Shares Outstanding1.7B

Price per Share$182.74

Pure Model Fair Value

$158.71

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%
5.50%	$203.72	$216.31	$233.94	$260.05	$249.43
6.50%	$172.15	$178.89	$187.56	$199.13	$215.32
7.50%	$149.69	$153.75	$158.71	$164.90	$172.87
8.50%	$132.44	$135.07	$138.18	$141.91	$146.47
9.50%	$118.53	$120.33	$122.41	$124.83	$127.69

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

$122.34

7.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.94

Base Case

$158.71

39.1% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.75

Bull Case

$203.26

78.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.64

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.04%

Year 3 Revenue Growth7.19%

Year 5 Revenue Growth7.24%

Year 7 Revenue Growth5.54%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin19.23%

Terminal EBIT Margin20.00%

Tax Rate22.94%

Historical Capex / Rev4.62%

Terminal Capex / Rev3.50%

NWC / Revenue8.12%

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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