Darden Restaurants, Inc.DRINYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $322.85 per share(market-calibrated)

+53.8%

Upside to Fair Value

Current

$209.87

Pure Model

$358.68

Fair Value

$322.85

Bull Case

$476.08

Bear Case

$272.19

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: $358.68.

What's Driving This Ratingfor DRI

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.24% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$45M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects 9.04% revenue growth, fading to 3.00% by Year 10. Revenue reaches $18.5B (vs $12.1B 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 65.39% indicates efficient cash generation. FCF reaches $2.0B by Year 10 (11.01% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.61

Market Risk Premium4.50%

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

Cost of Equity (Re)7.26%

Cost of Debt

Pre-tax Cost of Debt1.75%

Tax Rate11.47%

After-tax Cost of Debt1.55%

Equity Weight (E/V)79.83%

Debt Weight (D/V)20.17%

WACC Calculation

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

WACC = (79.83% × 7.26%) + (20.17% × 1.55%)

= 6.11%

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	$13.2B	$14.4B	$15.8B	$16.9B	$18.5B
EBIT	$1.8B	$1.9B	$2.1B	$2.3B	$2.5B
Tax	$202M	$222M	$243M	$259M	$284M
NOPAT	$1.6B	$1.7B	$1.9B	$2.0B	$2.2B
+ Depreciation	$454M	$498M	$547M	$582M	$637M
- Capex	$559M	$605M	$655M	$689M	$739M
- Δ NWC	$109M	$75M	$51M	$52M	$54M
Free Cash Flow	$1.3B	$1.5B	$1.7B	$1.8B	$2.0B
Discount Factor	0.942	0.837	0.743	0.660	0.553
Present Value	$1.3B	$1.3B	$1.3B	$1.2B	$1.1B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.0B

Terminal Growth Rate3.00%

WACC6.11%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$67.4B

PV of Terminal Value$37.2B

Exit Multiple Method

Year 10 EBITDA$3.1B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$62.2B

PV of Terminal Value$34.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.3B

PV of Terminal Value$37.2B

Enterprise Value$49.6B

(-) Net Debt$6.0B

Equity Value$43.6B

Shares Outstanding118M

Price per Share$370.78

Exit Multiple Method

PV of Projected FCFs$12.3B

PV of Terminal Value$34.4B

Enterprise Value$46.7B

(-) Net Debt$6.0B

Equity Value$40.7B

Shares Outstanding118M

Price per Share$346.58

Pure Model Fair Value

$358.68

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%
4.11%	$522.08	$519.21	$496.34	$474.53	$453.74
5.11%	$392.78	$426.82	$476.99	$474.53	$453.74
6.11%	$318.98	$336.08	$358.68	$389.94	$436.01
7.11%	$268.98	$278.88	$291.18	$306.90	$327.67
8.11%	$231.71	$237.97	$245.45	$254.56	$265.88

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

$272.19

29.7% vs current

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

Base Case

$358.68

70.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.61

Bull Case

$476.08

126.8% vs current

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

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.04%

Year 3 Revenue Growth5.47%

Year 5 Revenue Growth3.31%

Year 7 Revenue Growth3.18%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin13.39%

Tax Rate11.47%

Historical Capex / Rev4.24%

Terminal Capex / Rev4.00%

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: 20x EV/EBITDA (Consumer Cyclical 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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