Dell Technologies Inc.DELLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $620.33 per share(market-calibrated)

+327.3%

Upside to Fair Value

Current

$145.17

Pure Model

$675.20

Fair Value

$620.33

Bull Case

$875.67

Bear Case

$514.04

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $675.20.

What's Driving This Ratingfor DELL

✓

CapEx already efficient

CapEx at 2.44% 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 6.25% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $32.4B (18.86% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from -1.47% in Year 1 to -0.76% by Year 5 (per analyst consensus). That's below the 3.75% 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.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $557.01/share (26.4x terminal FCF) while exit multiple gives $793.38/share (39.6x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 70.75% indicates efficient cash generation. FCF reaches $26.0B by Year 10 (15.10% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.04

Market Risk Premium4.50%

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

Cost of Equity (Re)9.16%

Cost of Debt

Pre-tax Cost of Debt3.64%

Tax Rate18.27%

After-tax Cost of Debt2.98%

Equity Weight (E/V)76.13%

Debt Weight (D/V)23.87%

WACC Calculation

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

WACC = (76.13% × 9.16%) + (23.87% × 2.98%)

= 7.69%

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	$111.9B	$149.6B	$156.1B	$158.0B	$171.9B
EBIT	$7.0B	$9.4B	$9.8B	$20.5B	$32.4B
Tax	$1.3B	$1.7B	$1.8B	$3.8B	$5.9B
NOPAT	$5.7B	$7.6B	$8.0B	$16.8B	$26.5B
+ Depreciation	$2.8B	$3.7B	$3.9B	$3.9B	$4.3B
- Capex	$2.7B	$3.6B	$3.8B	$3.9B	$4.2B
- Δ NWC	-$167M	$1.5B	-$119M	$163M	$621M
Free Cash Flow	$5.9B	$6.2B	$8.2B	$16.7B	$26.0B
Discount Factor	0.929	0.801	0.691	0.596	0.477
Present Value	$5.5B	$5.0B	$5.6B	$9.9B	$12.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$26.0B

Terminal Growth Rate3.75%

WACC7.69%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$684.2B

PV of Terminal Value$326.3B

Exit Multiple Method

Year 10 EBITDA$36.7B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.0T

PV of Terminal Value$489.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$79.1B

PV of Terminal Value$326.3B

Enterprise Value$405.4B

(-) Net Debt$20.0B

Equity Value$385.5B

Shares Outstanding692M

Price per Share$557.01

Exit Multiple Method

PV of Projected FCFs$79.1B

PV of Terminal Value$489.9B

Enterprise Value$569.0B

(-) Net Debt$20.0B

Equity Value$549.0B

Shares Outstanding692M

Price per Share$793.38

Pure Model Fair Value

$675.20

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
5.69%	$905.06	$984.78	$1,080.53	$1,033.93	$989.54
6.69%	$737.59	$776.32	$828.25	$901.50	$989.54
7.69%	$625.62	$647.61	$675.20	$710.81	$758.55
8.69%	$542.67	$556.40	$572.92	$593.16	$618.54
9.69%	$477.35	$486.50	$497.18	$509.82	$525.03

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

$514.04

254.1% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.29

Base Case

$675.20

365.1% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.04

Bull Case

$875.67

503.2% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.88

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth-1.47%

Year 3 Revenue Growth11.04%

Year 5 Revenue Growth-0.76%

Year 7 Revenue Growth1.05%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin6.25%

Terminal EBIT Margin25.00%

Tax Rate18.27%

Historical Capex / Rev2.44%

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: 28x EV/EBITDA (Technology 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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