Cardinal Health, Inc.CAHNYSE

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DCF Valuation

⚠️Model Warnings

•Terminal value represents 87% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $4,016.72 per share(market-calibrated)

+1674.6%

Upside to Fair Value

Current

$226.35

Pure Model

$4,417.40

Fair Value

$4,016.72

Bull Case

$6,360.52

Bear Case

$3,072.43

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: $4,417.40.

What's Driving This Ratingfor CAH

✓

CapEx already efficient

CapEx at 0.21% 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 2.21% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $72.8B (14.17% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 16.19% revenue growth in Year 1, fading to 11.94% by Year 5 and 3.00% by Year 10. Revenue reaches $514.0B by Year 10 (vs $222.6B 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 73.69% indicates efficient cash generation. FCF reaches $54.9B by Year 10 (10.69% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.62

Market Risk Premium4.50%

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

Cost of Equity (Re)7.27%

Cost of Debt

Pre-tax Cost of Debt1.45%

Tax Rate25.32%

After-tax Cost of Debt1.08%

Equity Weight (E/V)85.37%

Debt Weight (D/V)14.63%

WACC Calculation

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

WACC = (85.37% × 7.27%) + (14.63% × 1.08%)

= 6.37%

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	$258.6B	$303.9B	$374.3B	$446.8B	$514.0B
EBIT	$5.7B	$6.7B	$8.3B	$38.5B	$72.8B
Tax	$1.4B	$1.7B	$2.1B	$9.7B	$18.4B
NOPAT	$4.3B	$5.0B	$6.2B	$28.7B	$54.4B
+ Depreciation	$859M	$1.0B	$1.2B	$1.5B	$1.7B
- Capex	$541M	$635M	$782M	$934M	$1.1B
- Δ NWC	$220M	$135M	$244M	$211M	$91M
Free Cash Flow	$4.4B	$5.3B	$6.4B	$29.1B	$54.9B
Discount Factor	0.940	0.831	0.734	0.649	0.539
Present Value	$4.1B	$4.4B	$4.7B	$18.9B	$29.6B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$54.9B

Terminal Growth Rate3.00%

WACC6.37%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.7T

PV of Terminal Value$906.6B

Exit Multiple Method

Year 10 EBITDA$74.5B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.8T

PV of Terminal Value$965.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$134.3B

PV of Terminal Value$906.6B

Enterprise Value$1.0T

(-) Net Debt$5.5B

Equity Value$1.0T

Shares Outstanding241M

Price per Share$4,296.11

Exit Multiple Method

PV of Projected FCFs$134.3B

PV of Terminal Value$965.0B

Enterprise Value$1.1T

(-) Net Debt$5.5B

Equity Value$1.1T

Shares Outstanding241M

Price per Share$4,538.68

Pure Model Fair Value

$4,417.40

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%
4.37%	$6,244.55	$6,765.22	$6,473.32	$6,195.41	$5,930.76
5.37%	$4,823.12	$5,191.96	$5,716.64	$6,195.41	$5,930.76
6.37%	$3,972.59	$4,166.23	$4,417.40	$4,756.18	$5,238.10
7.37%	$3,384.08	$3,499.15	$3,640.58	$3,818.59	$4,049.47
8.37%	$2,941.51	$3,015.53	$3,103.35	$3,209.22	$3,339.33

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

$3,072.43

1257.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.77

Base Case

$4,417.40

1851.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.62

Bull Case

$6,360.52

2710.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.52

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth16.19%

Year 3 Revenue Growth7.81%

Year 5 Revenue Growth11.94%

Year 7 Revenue Growth8.37%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin2.21%

Terminal EBIT Margin20.00%

Tax Rate25.32%

Historical Capex / Rev0.21%

NWC / Revenue0.61%

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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