The Hershey CompanyHSYNYSE

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

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $260.24 per share(market-calibrated)

+10.4%

Upside to Fair Value

Current

$235.69

Pure Model

$263.40

Fair Value

$260.24

Bull Case

$306.28

Bear Case

$230.87

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

1.94%

Calibrated Growth

2.42%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $263.40.

What's Driving This Ratingfor HSY

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.00% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$310M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects 4.69% revenue growth, fading to 2.50% by Year 10. Revenue reaches $15.5B (vs $11.7B today).

✓

Model and market roughly agree

Market-implied terminal growth of 1.94% is close to the model's 2.50% (only 56bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.50% indicates efficient cash generation. FCF reaches $2.3B by Year 10 (14.72% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.17

Market Risk Premium4.50%

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

Cost of Equity (Re)5.26%

Cost of Debt

Pre-tax Cost of Debt3.01%

Tax Rate27.26%

After-tax Cost of Debt2.19%

Equity Weight (E/V)89.88%

Debt Weight (D/V)10.12%

WACC Calculation

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

WACC = (89.88% × 5.26%) + (10.12% × 2.19%)

= 5.50%

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	$12.2B	$12.9B	$13.8B	$14.4B	$15.5B
EBIT	$2.4B	$2.5B	$2.7B	$2.8B	$3.0B
Tax	$655M	$689M	$738M	$773M	$831M
NOPAT	$1.7B	$1.8B	$2.0B	$2.1B	$2.2B
+ Depreciation	$434M	$456M	$489M	$512M	$551M
- Capex	$612M	$586M	$567M	$529M	$466M
- Δ NWC	$25M	$16M	$14M	$15M	$17M
Free Cash Flow	$1.5B	$1.7B	$1.9B	$2.0B	$2.3B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$1.5B	$1.4B	$1.4B	$1.4B	$1.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.3B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$78.1B

PV of Terminal Value$45.7B

Exit Multiple Method

Year 10 EBITDA$3.6B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$72.0B

PV of Terminal Value$42.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$14.1B

PV of Terminal Value$45.7B

Enterprise Value$59.9B

(-) Net Debt$4.5B

Equity Value$55.4B

Shares Outstanding203M

Price per Share$272.18

Exit Multiple Method

PV of Projected FCFs$14.1B

PV of Terminal Value$42.2B

Enterprise Value$56.3B

(-) Net Debt$4.5B

Equity Value$51.8B

Shares Outstanding203M

Price per Share$254.62

Pure Model Fair Value

$263.40

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.50%	$382.70	$366.20	$350.48	$335.50	$321.23
4.50%	$287.47	$312.68	$350.48	$335.50	$321.23
5.50%	$234.48	$246.88	$263.40	$286.53	$321.23
6.50%	$199.02	$206.10	$214.96	$226.34	$241.52
7.50%	$172.78	$177.22	$182.55	$189.06	$197.20

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

$230.87

-2.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.21

Base Case

$263.40

11.8% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.17

Bull Case

$306.28

30.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.69%

Year 3 Revenue Growth2.76%

Year 5 Revenue Growth2.29%

Year 7 Revenue Growth2.37%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin19.63%

Tax Rate27.26%

Historical Capex / Rev5.00%

Terminal Capex / Rev3.00%

NWC / Revenue4.48%

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 Defensive 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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