Builders FirstSource, Inc.BLDRNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $251.18 per share(market-calibrated)

+157.8%

Upside to Fair Value

Current

$97.45

Pure Model

$258.37

Fair Value

$251.18

Bull Case

$314.50

Bear Case

$206.05

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

0.50%

Calibrated Growth

1.64%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $258.37.

What's Driving This Ratingfor BLDR

✓

CapEx already efficient

CapEx at 2.35% 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 11.24% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.5B (12.54% margin).

→

Moderate revenue growth

Analyst consensus projects -1.05% revenue growth, fading to 2.25% by Year 10. Revenue reaches $20.3B (vs $15.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $218.10/share (16.2x terminal FCF) while exit multiple gives $298.65/share (24.8x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 175bps below the model's 2.25%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 72.60% indicates efficient cash generation. FCF reaches $2.4B by Year 10 (11.74% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.55

Market Risk Premium4.50%

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

Cost of Equity (Re)11.47%

Cost of Debt

Pre-tax Cost of Debt3.45%

Tax Rate15.07%

After-tax Cost of Debt2.93%

Equity Weight (E/V)65.78%

Debt Weight (D/V)34.22%

WACC Calculation

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

WACC = (65.78% × 11.47%) + (34.22% × 2.93%)

= 8.55%

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	$15.0B	$17.0B	$18.2B	$19.0B	$20.3B
EBIT	$1.7B	$1.9B	$2.1B	$2.3B	$2.5B
Tax	$255M	$288M	$317M	$346M	$383M
NOPAT	$1.4B	$1.6B	$1.8B	$2.0B	$2.2B
+ Depreciation	$545M	$616M	$659M	$689M	$736M
- Capex	$354M	$400M	$427M	$447M	$478M
- Δ NWC	-$14M	$87M	$34M	$36M	$38M
Free Cash Flow	$1.6B	$1.8B	$2.0B	$2.2B	$2.4B
Discount Factor	0.921	0.782	0.664	0.563	0.440
Present Value	$1.5B	$1.4B	$1.3B	$1.2B	$1.0B

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 Rate2.25%

WACC8.55%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$38.7B

PV of Terminal Value$17.0B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$59.1B

PV of Terminal Value$26.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.7B

PV of Terminal Value$17.0B

Enterprise Value$29.8B

(-) Net Debt$5.5B

Equity Value$24.3B

Shares Outstanding111M

Price per Share$218.10

Exit Multiple Method

PV of Projected FCFs$12.7B

PV of Terminal Value$26.0B

Enterprise Value$38.7B

(-) Net Debt$5.5B

Equity Value$33.3B

Shares Outstanding111M

Price per Share$298.65

Pure Model Fair Value

$258.37

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%
6.55%	$325.94	$337.83	$352.48	$371.00	$395.12
7.55%	$281.96	$289.57	$298.61	$309.54	$323.01
8.55%	$247.25	$252.41	$258.37	$265.37	$273.69
9.55%	$218.84	$222.47	$226.61	$231.35	$236.85
10.55%	$194.96	$197.61	$200.58	$203.93	$207.74

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

$206.05

111.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.94

Base Case

$258.37

165.1% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.55

Bull Case

$314.50

222.7% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.32

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-1.05%

Year 3 Revenue Growth6.38%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin11.24%

Terminal EBIT Margin13.00%

Tax Rate15.07%

Historical Capex / Rev2.35%

NWC / Revenue8.53%

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: 18x EV/EBITDA (Industrials 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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