Charles River Laboratories International, Inc.CRLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $231.39 per share(market-calibrated)

+31.7%

Upside to Fair Value

Current

$175.74

Pure Model

$229.46

Fair Value

$231.39

Bull Case

$286.52

Bear Case

$174.17

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

3.69%

Calibrated Growth

3.17%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $229.46.

What's Driving This Ratingfor CRL

↓

CapEx normalizing toward maintenance

Historical CapEx is 6.60% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$164M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 13.66% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $947M (17.92% margin).

→

Moderate revenue growth

Analyst consensus projects 0.73% revenue growth, fading to 3.00% by Year 10. Revenue reaches $5.3B (vs $4.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $158.82/share (16.1x terminal FCF) while exit multiple gives $300.09/share (33.5x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 3.69% is close to the model's 3.00% (only 69bps 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 71.72% indicates efficient cash generation. FCF reaches $990M by Year 10 (18.74% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.62

Market Risk Premium4.50%

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

Cost of Equity (Re)11.79%

Cost of Debt

Pre-tax Cost of Debt3.28%

Tax Rate21.00%

After-tax Cost of Debt2.59%

Equity Weight (E/V)73.97%

Debt Weight (D/V)26.03%

WACC Calculation

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

WACC = (73.97% × 11.79%) + (26.03% × 2.59%)

= 9.40%

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	$4.0B	$4.4B	$4.6B	$4.9B	$5.3B
EBIT	$552M	$599M	$635M	$775M	$947M
Tax	$116M	$126M	$133M	$163M	$199M
NOPAT	$436M	$473M	$501M	$612M	$748M
+ Depreciation	$332M	$360M	$382M	$399M	$434M
- Capex	$267M	$259M	$243M	$220M	$185M
- Δ NWC	$1M	$8M	$4M	$5M	$7M
Free Cash Flow	$500M	$566M	$636M	$786M	$990M
Discount Factor	0.914	0.764	0.638	0.533	0.407
Present Value	$457M	$432M	$406M	$419M	$403M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$990M

Terminal Growth Rate3.00%

WACC9.40%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$15.9B

PV of Terminal Value$6.5B

Exit Multiple Method

Year 10 EBITDA$1.4B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$33.1B

PV of Terminal Value$13.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$4.2B

PV of Terminal Value$6.5B

Enterprise Value$10.7B

(-) Net Debt$2.9B

Equity Value$7.9B

Shares Outstanding50M

Price per Share$158.82

Exit Multiple Method

PV of Projected FCFs$4.2B

PV of Terminal Value$13.5B

Enterprise Value$17.7B

(-) Net Debt$2.9B

Equity Value$14.9B

Shares Outstanding50M

Price per Share$300.09

Pure Model Fair Value

$229.46

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%
7.40%	$293.11	$303.06	$315.27	$330.61	$350.47
8.40%	$252.53	$258.94	$266.54	$275.69	$286.93
9.40%	$220.04	$224.41	$229.46	$235.36	$242.35
10.40%	$193.15	$196.24	$199.75	$203.78	$208.42
11.40%	$170.36	$172.62	$175.15	$178.01	$181.24

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

$174.17

-0.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 2.03

Base Case

$229.46

30.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.62

Bull Case

$286.52

63.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.38

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.73%

Year 3 Revenue Growth4.48%

Year 5 Revenue Growth1.99%

Year 7 Revenue Growth2.40%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin13.66%

Terminal EBIT Margin20.00%

Tax Rate21.00%

Historical Capex / Rev6.60%

Terminal Capex / Rev3.50%

NWC / Revenue4.33%

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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