Air Products and Chemicals, Inc.APDNYSE

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

DCF Valuation

⚠️Model Warnings

•Terminal value represents 88% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Sell

Fair Value: $168.88 per share(market-calibrated)

-38.9%

Upside to Fair Value

Current

$276.43

Pure Model

$159.61

Fair Value

$168.88

Bull Case

$224.59

Bear Case

$109.09

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

3.56%

Calibrated Growth

2.58%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $159.61.

What's Driving This Ratingfor APD

↓

CapEx normalizing toward maintenance

Historical CapEx is 39.60% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$5.9B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 22.48% 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.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 4.41% in Year 1 to 0.41% by Year 5 (per analyst consensus). That's below the 2.25% 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 higher long-term growth

To justify $276.43, the market implies 3.56% perpetual growth — 131bps above the model's 2.25%. 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 74.10% indicates efficient cash generation. FCF reaches $4.2B by Year 10 (25.32% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.89

Market Risk Premium4.50%

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

Cost of Equity (Re)8.50%

Cost of Debt

Pre-tax Cost of Debt0.96%

Tax Rate21.00%

After-tax Cost of Debt0.76%

Equity Weight (E/V)76.99%

Debt Weight (D/V)23.01%

WACC Calculation

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

WACC = (76.99% × 8.50%) + (23.01% × 0.76%)

= 6.71%

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	$12.6B	$14.0B	$15.3B	$15.6B	$16.5B
EBIT	$2.8B	$3.1B	$3.4B	$3.5B	$3.7B
Tax	$593M	$659M	$722M	$736M	$778M
NOPAT	$2.2B	$2.5B	$2.7B	$2.8B	$2.9B
+ Depreciation	$1.5B	$1.6B	$1.8B	$1.8B	$1.9B
- Capex	$5.0B	$4.4B	$3.6B	$2.5B	$659M
- Δ NWC	$31M	$39M	$4M	$10M	$21M
Free Cash Flow	-$1.3B	-$353M	$863M	$2.1B	$4.2B
Discount Factor	0.937	0.823	0.723	0.634	0.522
Present Value	-$1.2B	-$290M	$624M	$1.3B	$2.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.2B

Terminal Growth Rate2.25%

WACC6.71%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$95.6B

PV of Terminal Value$49.9B

Exit Multiple Method

Year 10 EBITDA$5.6B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$78.9B

PV of Terminal Value$41.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.6B

PV of Terminal Value$49.9B

Enterprise Value$56.5B

(-) Net Debt$16.6B

Equity Value$39.9B

Shares Outstanding223M

Price per Share$179.21

Exit Multiple Method

PV of Projected FCFs$6.6B

PV of Terminal Value$41.2B

Enterprise Value$47.7B

(-) Net Debt$16.6B

Equity Value$31.2B

Shares Outstanding223M

Price per Share$140.01

Pure Model Fair Value

$159.61

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
4.71%	$245.78	$275.90	$318.23	$375.19	$355.68
5.71%	$181.57	$197.61	$218.29	$245.93	$284.80
6.71%	$138.22	$147.84	$159.61	$174.35	$193.35
7.71%	$106.44	$112.66	$120.02	$128.86	$139.69
8.71%	$81.84	$86.09	$90.99	$96.72	$103.49

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

$109.09

-60.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.11

Base Case

$159.61

-42.3% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.89

Bull Case

$224.59

-18.8% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.75

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.41%

Year 3 Revenue Growth5.08%

Year 5 Revenue Growth0.41%

Year 7 Revenue Growth1.15%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin22.48%

Tax Rate21.00%

Historical Capex / Rev39.60%

Terminal Capex / Rev4.00%

NWC / Revenue5.82%

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: 14x EV/EBITDA (Basic Materials 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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