Colgate-Palmolive CompanyCLNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $99.67 per share(market-calibrated)

+4.6%

Upside to Fair Value

Current

$95.28

Pure Model

$100.28

Fair Value

$99.67

Bull Case

$116.60

Bear Case

$85.86

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

2.21%

Calibrated Growth

2.46%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $100.28.

What's Driving This Ratingfor CL

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.04% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$10M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 16.99% — below the sector mature average of 21.33%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.6B (16.99% margin).

→

Moderate revenue growth

Analyst consensus projects 4.49% revenue growth, fading to 2.50% by Year 10. Revenue reaches $27.3B (vs $20.4B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.21% is close to the model's 2.50% (only 29bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 62.22% indicates efficient cash generation. FCF reaches $3.4B by Year 10 (12.34% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.26

Market Risk Premium4.50%

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

Cost of Equity (Re)5.69%

Cost of Debt

Pre-tax Cost of Debt2.83%

Tax Rate26.09%

After-tax Cost of Debt2.09%

Equity Weight (E/V)90.61%

Debt Weight (D/V)9.39%

WACC Calculation

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

WACC = (90.61% × 5.69%) + (9.39% × 2.09%)

= 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	$21.3B	$22.9B	$24.2B	$25.4B	$27.3B
EBIT	$3.6B	$3.9B	$4.1B	$4.3B	$4.6B
Tax	$944M	$1.0B	$1.1B	$1.1B	$1.2B
NOPAT	$2.7B	$2.9B	$3.0B	$3.2B	$3.4B
+ Depreciation	$607M	$651M	$688M	$723M	$778M
- Capex	$646M	$692M	$730M	$764M	$819M
- Δ NWC	$24M	$21M	$15M	$16M	$17M
Free Cash Flow	$2.6B	$2.8B	$3.0B	$3.1B	$3.4B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$2.5B	$2.4B	$2.3B	$2.2B	$2.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.4B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$115.2B

PV of Terminal Value$67.4B

Exit Multiple Method

Year 10 EBITDA$5.4B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$108.3B

PV of Terminal Value$63.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$22.4B

PV of Terminal Value$67.4B

Enterprise Value$89.8B

(-) Net Debt$6.7B

Equity Value$83.1B

Shares Outstanding809M

Price per Share$102.74

Exit Multiple Method

PV of Projected FCFs$22.4B

PV of Terminal Value$63.4B

Enterprise Value$85.8B

(-) Net Debt$6.7B

Equity Value$79.1B

Shares Outstanding809M

Price per Share$97.81

Pure Model Fair Value

$100.28

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%
3.50%	$144.83	$138.63	$132.72	$127.09	$121.73
4.50%	$109.35	$118.70	$132.72	$127.09	$121.73
5.50%	$89.55	$94.15	$100.28	$108.86	$121.73
6.50%	$76.27	$78.89	$82.18	$86.40	$92.03
7.50%	$66.41	$68.05	$70.03	$72.45	$75.46

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

$85.86

-9.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.33

Base Case

$100.28

5.2% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.26

Bull Case

$116.60

22.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Defensive Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.49%

Year 3 Revenue Growth3.75%

Year 5 Revenue Growth2.44%

Year 7 Revenue Growth2.46%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin16.99%

Terminal EBIT Margin21.33%

Tax Rate26.09%

Historical Capex / Rev3.04%

Terminal Capex / Rev3.00%

NWC / Revenue2.60%

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: 20x EV/EBITDA (Consumer Defensive 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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