Becton, Dickinson and CompanyBDXNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $395.30 per share(market-calibrated)

+126.9%

Upside to Fair Value

Current

$174.21

Pure Model

$459.15

Fair Value

$395.30

Bull Case

$538.00

Bear Case

$404.18

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $459.15.

What's Driving This Ratingfor BDX

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.18% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$175M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 11.55% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.4B (17.23% margin).

→

Moderate revenue growth

Analyst consensus projects -11.92% revenue growth, fading to 3.00% by Year 10. Revenue reaches $25.7B (vs $21.8B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps 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 79.87% indicates efficient cash generation. FCF reaches $5.7B by Year 10 (22.20% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.28

Market Risk Premium4.50%

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

Cost of Equity (Re)5.78%

Cost of Debt

Pre-tax Cost of Debt2.57%

Tax Rate10.84%

After-tax Cost of Debt2.29%

Equity Weight (E/V)72.25%

Debt Weight (D/V)27.75%

WACC Calculation

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

WACC = (72.25% × 5.78%) + (27.75% × 2.29%)

= 5.50%

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	$19.2B	$20.4B	$21.9B	$23.5B	$25.7B
EBIT	$2.2B	$2.4B	$2.5B	$3.4B	$4.4B
Tax	$241M	$255M	$274M	$371M	$481M
NOPAT	$2.0B	$2.1B	$2.3B	$3.1B	$4.0B
+ Depreciation	$2.0B	$2.2B	$2.3B	$2.5B	$2.7B
- Capex	$804M	$820M	$849M	$874M	$901M
- Δ NWC	-$202M	$54M	$61M	$60M	$58M
Free Cash Flow	$3.4B	$3.4B	$3.7B	$4.6B	$5.7B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$3.2B	$2.9B	$2.8B	$3.2B	$3.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.7B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$235.4B

PV of Terminal Value$137.8B

Exit Multiple Method

Year 10 EBITDA$7.2B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$171.7B

PV of Terminal Value$100.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$30.8B

PV of Terminal Value$137.8B

Enterprise Value$168.6B

(-) Net Debt$18.3B

Equity Value$150.3B

Shares Outstanding287M

Price per Share$524.23

Exit Multiple Method

PV of Projected FCFs$30.8B

PV of Terminal Value$100.5B

Enterprise Value$131.3B

(-) Net Debt$18.3B

Equity Value$112.9B

Shares Outstanding287M

Price per Share$394.07

Pure Model Fair Value

$459.15

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%
3.50%	$598.24	$571.14	$545.32	$520.71	$497.26
4.50%	$504.06	$571.14	$545.32	$520.71	$497.26
5.50%	$388.79	$418.11	$459.15	$520.71	$497.26
6.50%	$317.81	$333.52	$353.72	$380.65	$418.35
7.50%	$267.81	$277.26	$288.81	$303.26	$321.82

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

$404.18

132.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.36

Base Case

$459.15

163.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.28

Bull Case

$538.00

208.8% 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 Growth-11.92%

Year 3 Revenue Growth3.52%

Year 5 Revenue Growth3.69%

Year 7 Revenue Growth3.42%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin11.55%

Terminal EBIT Margin20.00%

Tax Rate10.84%

Historical Capex / Rev4.18%

Terminal Capex / Rev3.50%

NWC / Revenue7.78%

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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