Henry Schein, Inc.HSICNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $337.94 per share(market-calibrated)

+319.4%

Upside to Fair Value

Current

$80.58

Pure Model

$368.75

Fair Value

$337.94

Bull Case

$473.05

Bear Case

$286.73

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: $368.75.

What's Driving This Ratingfor HSIC

✓

CapEx already efficient

CapEx at 0.98% 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 5.68% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.0B (16.25% margin).

→

Moderate revenue growth

Analyst consensus projects 4.06% revenue growth, fading to 3.00% by Year 10. Revenue reaches $18.3B (vs $13.2B 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 71.48% indicates efficient cash generation. FCF reaches $2.4B by Year 10 (12.94% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.85

Market Risk Premium4.50%

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

Cost of Equity (Re)8.33%

Cost of Debt

Pre-tax Cost of Debt2.38%

Tax Rate23.12%

After-tax Cost of Debt1.83%

Equity Weight (E/V)72.53%

Debt Weight (D/V)27.47%

WACC Calculation

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

WACC = (72.53% × 8.33%) + (27.47% × 1.83%)

= 6.55%

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	$13.7B	$14.7B	$15.8B	$16.7B	$18.3B
EBIT	$780M	$837M	$1.3B	$2.1B	$3.0B
Tax	$180M	$193M	$311M	$490M	$686M
NOPAT	$599M	$643M	$1.0B	$1.6B	$2.3B
+ Depreciation	$254M	$273M	$292M	$310M	$339M
- Capex	$135M	$145M	$155M	$164M	$180M
- Δ NWC	$78M	$74M	$67M	$71M	$77M
Free Cash Flow	$641M	$698M	$1.1B	$1.7B	$2.4B
Discount Factor	0.939	0.827	0.728	0.641	0.530
Present Value	$602M	$577M	$805M	$1.1B	$1.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.4B

Terminal Growth Rate3.00%

WACC6.55%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$68.6B

PV of Terminal Value$36.4B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$79.3B

PV of Terminal Value$42.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.9B

PV of Terminal Value$36.4B

Enterprise Value$45.2B

(-) Net Debt$3.5B

Equity Value$41.7B

Shares Outstanding121M

Price per Share$345.17

Exit Multiple Method

PV of Projected FCFs$8.9B

PV of Terminal Value$42.1B

Enterprise Value$50.9B

(-) Net Debt$3.5B

Equity Value$47.4B

Shares Outstanding121M

Price per Share$392.33

Pure Model Fair Value

$368.75

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%
4.55%	$514.93	$577.71	$562.07	$537.38	$513.85
5.55%	$403.80	$431.61	$470.33	$527.96	$513.85
6.55%	$334.51	$349.51	$368.75	$394.30	$429.87
7.55%	$285.31	$294.38	$305.44	$319.24	$336.93
8.55%	$247.64	$253.55	$260.51	$268.86	$279.04

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

$286.73

255.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.06

Base Case

$368.75

357.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.85

Bull Case

$473.05

487.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.72

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.06%

Year 3 Revenue Growth3.58%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin5.68%

Terminal EBIT Margin20.00%

Tax Rate23.12%

Historical Capex / Rev0.98%

NWC / Revenue14.51%

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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