Edwards Lifesciences CorporationEWNYSE

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

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $79.98 per share(market-calibrated)

-8.3%

Upside to Fair Value

Current

$87.18

Pure Model

$78.77

Fair Value

$79.98

Bull Case

$101.23

Bear Case

$60.20

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

5.17%

Calibrated Growth

3.33%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $78.77.

What's Driving This Ratingfor EW

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.53% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$129M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 28.77% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

↑

Strong near-term revenue growth

Analyst consensus projects 10.12% revenue growth in Year 1, fading to 8.91% by Year 5 and 3.00% by Year 10. Revenue reaches $12.6B by Year 10 (vs $6.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $62.44/share (18.3x terminal FCF) while exit multiple gives $95.10/share (34.2x 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.

🎯

Market pricing in higher long-term growth

To justify $87.18, the market implies 5.17% perpetual growth — 217bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 70.25% indicates efficient cash generation. FCF reaches $2.8B by Year 10 (21.91% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.94

Market Risk Premium4.50%

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

Cost of Equity (Re)8.73%

Cost of Debt

Pre-tax Cost of Debt2.51%

Tax Rate17.04%

After-tax Cost of Debt2.08%

Equity Weight (E/V)98.64%

Debt Weight (D/V)1.36%

WACC Calculation

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

WACC = (98.64% × 8.73%) + (1.36% × 2.08%)

= 8.64%

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	$6.7B	$8.1B	$9.7B	$11.1B	$12.6B
EBIT	$1.9B	$2.3B	$2.8B	$3.2B	$3.6B
Tax	$328M	$396M	$474M	$545M	$616M
NOPAT	$1.6B	$1.9B	$2.3B	$2.7B	$3.0B
+ Depreciation	$161M	$194M	$233M	$268M	$303M
- Capex	$302M	$347M	$394M	$427M	$440M
- Δ NWC	$184M	$219M	$237M	$205M	$110M
Free Cash Flow	$1.3B	$1.6B	$1.9B	$2.3B	$2.8B
Discount Factor	0.920	0.780	0.661	0.560	0.437
Present Value	$1.2B	$1.2B	$1.3B	$1.3B	$1.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.8B

Terminal Growth Rate3.00%

WACC8.64%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$50.2B

PV of Terminal Value$21.9B

Exit Multiple Method

Year 10 EBITDA$3.9B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$94.0B

PV of Terminal Value$41.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.3B

PV of Terminal Value$21.9B

Enterprise Value$34.3B

(-) Net Debt-$2.2B

Equity Value$36.5B

Shares Outstanding585M

Price per Share$62.44

Exit Multiple Method

PV of Projected FCFs$12.3B

PV of Terminal Value$41.0B

Enterprise Value$53.4B

(-) Net Debt-$2.2B

Equity Value$55.6B

Shares Outstanding585M

Price per Share$95.10

Pure Model Fair Value

$78.77

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%
6.64%	$96.69	$100.12	$104.50	$110.27	$118.23
7.64%	$84.90	$86.99	$89.54	$92.69	$96.72
8.64%	$75.79	$77.16	$78.77	$80.69	$83.03
9.64%	$68.41	$69.35	$70.44	$71.70	$73.18
10.64%	$62.26	$62.93	$63.69	$64.56	$65.56

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

$60.20

-30.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.17

Base Case

$78.77

-9.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.94

Bull Case

$101.23

16.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.80

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.12%

Year 3 Revenue Growth9.96%

Year 5 Revenue Growth8.91%

Year 7 Revenue Growth6.55%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin28.77%

Tax Rate17.04%

Historical Capex / Rev4.53%

Terminal Capex / Rev3.50%

NWC / Revenue30.00%

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: 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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