Bristol-Myers Squibb CompanyBMYNYSE

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DCF Valuation

⚠️Model Warnings

•Revenue projections show 22% decline from peak. Analyst estimates may reflect secular headwinds or transition period.

DCF Valuation Summary

Strong Buy

Fair Value: $119.57 per share(market-calibrated)

+91.8%

Upside to Fair Value

Current

$62.34

Pure Model

$137.39

Fair Value

$119.57

Bull Case

$144.77

Bear Case

$134.31

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: $137.39.

What's Driving This Ratingfor BMY

✓

CapEx already efficient

CapEx at 2.43% 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 13.98% — below the sector mature average of 26.34%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $6.9B (18.03% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from -3.06% in Year 1 to -1.76% 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 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 81.03% indicates efficient cash generation. FCF reaches $11.4B by Year 10 (29.52% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.29

Market Risk Premium4.50%

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

Cost of Equity (Re)5.83%

Cost of Debt

Pre-tax Cost of Debt3.05%

Tax Rate24.36%

After-tax Cost of Debt2.31%

Equity Weight (E/V)72.97%

Debt Weight (D/V)27.03%

WACC Calculation

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

WACC = (72.97% × 5.83%) + (27.03% × 2.31%)

= 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	$46.7B	$40.7B	$36.4B	$36.2B	$38.5B
EBIT	$6.5B	$5.7B	$5.1B	$5.8B	$6.9B
Tax	$1.6B	$1.4B	$1.2B	$1.4B	$1.7B
NOPAT	$4.9B	$4.3B	$3.9B	$4.4B	$5.2B
+ Depreciation	$8.6B	$7.5B	$6.7B	$6.7B	$7.1B
- Capex	$1.1B	$990M	$886M	$880M	$935M
- Δ NWC	-$43M	-$151M	-$19M	$2M	$33M
Free Cash Flow	$12.4B	$11.0B	$9.7B	$10.2B	$11.4B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$11.8B	$9.3B	$7.4B	$7.0B	$6.6B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$11.4B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$467.8B

PV of Terminal Value$273.9B

Exit Multiple Method

Year 10 EBITDA$14.0B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$336.3B

PV of Terminal Value$196.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$82.0B

PV of Terminal Value$273.9B

Enterprise Value$355.8B

(-) Net Debt$36.9B

Equity Value$318.9B

Shares Outstanding2.0B

Price per Share$156.25

Exit Multiple Method

PV of Projected FCFs$82.0B

PV of Terminal Value$196.9B

Enterprise Value$278.8B

(-) Net Debt$36.9B

Equity Value$241.9B

Shares Outstanding2.0B

Price per Share$118.53

Pure Model Fair Value

$137.39

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%	$176.54	$168.87	$161.55	$154.57	$147.92
4.50%	$150.15	$168.87	$161.55	$154.57	$147.92
5.50%	$117.76	$125.94	$137.39	$154.57	$147.92
6.50%	$97.73	$102.11	$107.75	$115.26	$125.79
7.50%	$83.56	$86.20	$89.43	$93.46	$98.64

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

$134.31

115.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.37

Base Case

$137.39

120.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.29

Bull Case

$144.77

132.2% 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 Growth-3.06%

Year 3 Revenue Growth-11.18%

Year 5 Revenue Growth-1.76%

Year 7 Revenue Growth0.14%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin13.98%

Terminal EBIT Margin26.34%

Tax Rate24.36%

Historical Capex / Rev2.43%

NWC / Revenue2.94%

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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