Cincinnati Financial CorporationCINFNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $333.08 per share(market-calibrated)

+97.6%

Upside to Fair Value

Current

$168.53

Pure Model

$349.76

Fair Value

$333.08

Bull Case

$412.43

Bear Case

$293.94

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $349.76.

What's Driving This Ratingfor CINF

✓

CapEx already efficient

CapEx at 0.14% 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 23.59% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.5B (28.00% margin).

→

Moderate revenue growth

Historical trends suggest 2.50% revenue growth, fading to 2.50% by Year 10. Revenue reaches $16.2B (vs $12.6B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 79.65% indicates efficient cash generation. FCF reaches $3.7B by Year 10 (23.10% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.65

Market Risk Premium4.50%

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

Cost of Equity (Re)7.41%

Cost of Debt

Pre-tax Cost of Debt4.93%

Tax Rate19.70%

After-tax Cost of Debt3.96%

Equity Weight (E/V)96.77%

Debt Weight (D/V)3.23%

WACC Calculation

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

WACC = (96.77% × 7.41%) + (3.23% × 3.96%)

= 7.30%

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	$12.9B	$13.6B	$14.3B	$15.0B	$16.2B
EBIT	$3.1B	$3.3B	$3.7B	$4.0B	$4.5B
Tax	$602M	$658M	$719M	$785M	$892M
NOPAT	$2.5B	$2.7B	$2.9B	$3.2B	$3.6B
+ Depreciation	$129M	$136M	$143M	$150M	$161M
- Capex	$18M	$19M	$20M	$21M	$23M
- Δ NWC	$32M	$33M	$35M	$37M	$39M
Free Cash Flow	$2.5B	$2.8B	$3.0B	$3.3B	$3.7B
Discount Factor	0.932	0.810	0.703	0.611	0.495
Present Value	$2.4B	$2.2B	$2.1B	$2.0B	$1.8B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.7B

Terminal Growth Rate2.50%

WACC7.30%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$79.8B

PV of Terminal Value$39.5B

Exit Multiple Method

Year 10 EBITDA$4.7B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$56.3B

PV of Terminal Value$27.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$21.0B

PV of Terminal Value$39.5B

Enterprise Value$60.5B

(-) Net Debt-$545M

Equity Value$61.0B

Shares Outstanding158M

Price per Share$386.67

Exit Multiple Method

PV of Projected FCFs$21.0B

PV of Terminal Value$27.8B

Enterprise Value$48.8B

(-) Net Debt-$545M

Equity Value$49.3B

Shares Outstanding158M

Price per Share$312.84

Pure Model Fair Value

$349.76

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
5.30%	$445.93	$475.66	$516.03	$573.98	$612.02
6.30%	$376.14	$392.72	$413.67	$440.98	$478.06
7.30%	$327.16	$337.39	$349.76	$365.00	$384.26
8.30%	$290.21	$296.96	$304.88	$314.29	$325.66
9.30%	$260.96	$265.64	$271.00	$277.21	$284.50

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

$293.94

74.4% vs current

• -25% vs historical growth trends
• Terminal growth: 2.0%
• Beta: 0.81

Base Case

$349.76

107.5% vs current

• Historical growth trends
• Terminal growth: 2.5%
• Beta: 0.65

Bull Case

$412.43

144.7% vs current

• +25% vs historical growth trends
• Terminal growth: 3.0%
• Beta: 0.55

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.50%

Year 3 Revenue Growth2.50%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin23.59%

Terminal EBIT Margin28.00%

Tax Rate19.70%

Historical Capex / Rev0.14%

NWC / Revenue10.00%

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: 12x EV/EBITDA (Financial Services 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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