Hologic, Inc.HOLXNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $132.75 per share(market-calibrated)

+75.9%

Upside to Fair Value

Current

$75.46

Pure Model

$140.83

Fair Value

$132.75

Bull Case

$172.07

Bear Case

$114.48

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: $140.83.

What's Driving This Ratingfor HOLX

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.57% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$4M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 27.98% 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.

→

Moderate revenue growth

Analyst consensus projects 2.89% revenue growth, fading to 3.00% by Year 10. Revenue reaches $5.9B (vs $4.1B 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 76.12% indicates efficient cash generation. FCF reaches $1.6B by Year 10 (27.86% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.73

Market Risk Premium4.50%

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

Cost of Equity (Re)7.80%

Cost of Debt

Pre-tax Cost of Debt3.54%

Tax Rate16.96%

After-tax Cost of Debt2.94%

Equity Weight (E/V)86.71%

Debt Weight (D/V)13.29%

WACC Calculation

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

WACC = (86.71% × 7.80%) + (13.29% × 2.94%)

= 7.15%

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	$4.2B	$4.6B	$5.1B	$5.4B	$5.9B
EBIT	$1.2B	$1.3B	$1.4B	$1.5B	$1.6B
Tax	$200M	$220M	$240M	$254M	$278M
NOPAT	$980M	$1.1B	$1.2B	$1.2B	$1.4B
+ Depreciation	$364M	$400M	$436M	$462M	$505M
- Capex	$151M	$165M	$179M	$189M	$205M
- Δ NWC	$20M	$37M	$25M	$27M	$29M
Free Cash Flow	$1.2B	$1.3B	$1.4B	$1.5B	$1.6B
Discount Factor	0.933	0.813	0.708	0.617	0.501
Present Value	$1.1B	$1.0B	$995M	$920M	$818M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.6B

Terminal Growth Rate3.00%

WACC7.15%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$40.5B

PV of Terminal Value$20.3B

Exit Multiple Method

Year 10 EBITDA$2.1B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$51.4B

PV of Terminal Value$25.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$9.6B

PV of Terminal Value$20.3B

Enterprise Value$29.9B

(-) Net Debt$667M

Equity Value$29.2B

Shares Outstanding227M

Price per Share$128.72

Exit Multiple Method

PV of Projected FCFs$9.6B

PV of Terminal Value$25.8B

Enterprise Value$35.4B

(-) Net Debt$667M

Equity Value$34.7B

Shares Outstanding227M

Price per Share$152.93

Pure Model Fair Value

$140.83

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%
5.15%	$182.71	$196.37	$216.37	$218.16	$209.43
6.15%	$152.47	$159.38	$168.49	$181.03	$199.40
7.15%	$131.82	$135.84	$140.83	$147.19	$155.56
8.15%	$116.35	$118.90	$121.95	$125.64	$130.23
9.15%	$104.09	$105.80	$107.80	$110.14	$112.95

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

$114.48

51.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.92

Base Case

$140.83

86.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.73

Bull Case

$172.07

128.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.62

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.89%

Year 3 Revenue Growth4.86%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin27.98%

Tax Rate16.96%

Historical Capex / Rev3.57%

Terminal Capex / Rev3.50%

NWC / Revenue17.14%

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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