GE HealthCare Technologies Inc.GEHCNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $153.74 per share(market-calibrated)

+96.8%

Upside to Fair Value

Current

$78.13

Pure Model

$160.21

Fair Value

$153.74

Bull Case

$198.87

Bear Case

$125.53

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: $160.21.

What's Driving This Ratingfor GEHC

✓

CapEx already efficient

CapEx at 1.77% 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 15.29% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $5.7B (18.77% margin).

→

Moderate revenue growth

Analyst consensus projects 5.08% revenue growth, fading to 3.00% by Year 10. Revenue reaches $30.4B (vs $20.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $126.66/share (19.1x terminal FCF) while exit multiple gives $193.75/share (33.7x 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 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 71.31% indicates efficient cash generation. FCF reaches $4.7B by Year 10 (15.47% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.23

Market Risk Premium4.50%

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

Cost of Equity (Re)10.04%

Cost of Debt

Pre-tax Cost of Debt3.25%

Tax Rate22.18%

After-tax Cost of Debt2.53%

Equity Weight (E/V)78.10%

Debt Weight (D/V)21.90%

WACC Calculation

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

WACC = (78.10% × 10.04%) + (21.90% × 2.53%)

= 8.39%

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	$21.7B	$23.8B	$26.3B	$27.9B	$30.4B
EBIT	$3.3B	$3.6B	$4.3B	$4.9B	$5.7B
Tax	$735M	$807M	$945M	$1.1B	$1.3B
NOPAT	$2.6B	$2.8B	$3.3B	$3.8B	$4.4B
+ Depreciation	$636M	$698M	$770M	$817M	$893M
- Capex	$384M	$422M	$465M	$494M	$539M
- Δ NWC	$105M	$111M	$76M	$81M	$89M
Free Cash Flow	$2.7B	$3.0B	$3.5B	$4.1B	$4.7B
Discount Factor	0.923	0.785	0.668	0.569	0.447
Present Value	$2.5B	$2.4B	$2.4B	$2.3B	$2.1B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.7B

Terminal Growth Rate3.00%

WACC8.39%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$89.9B

PV of Terminal Value$40.2B

Exit Multiple Method

Year 10 EBITDA$6.6B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$158.5B

PV of Terminal Value$70.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$23.1B

PV of Terminal Value$40.2B

Enterprise Value$63.3B

(-) Net Debt$5.5B

Equity Value$57.8B

Shares Outstanding457M

Price per Share$126.66

Exit Multiple Method

PV of Projected FCFs$23.1B

PV of Terminal Value$70.8B

Enterprise Value$93.9B

(-) Net Debt$5.5B

Equity Value$88.5B

Shares Outstanding457M

Price per Share$193.75

Pure Model Fair Value

$160.21

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%
6.39%	$201.93	$210.56	$221.73	$236.77	$258.08
7.39%	$174.15	$179.29	$185.60	$193.53	$203.80
8.39%	$152.97	$156.28	$160.21	$164.94	$170.74
9.39%	$135.98	$138.23	$140.84	$143.89	$147.51
10.39%	$121.90	$123.49	$125.31	$127.39	$129.79

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

$125.53

60.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.54

Base Case

$160.21

105.1% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.23

Bull Case

$198.87

154.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.05

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.08%

Year 3 Revenue Growth4.92%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.29%

Terminal EBIT Margin20.00%

Tax Rate22.18%

Historical Capex / Rev1.77%

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: 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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