IQVIA Holdings Inc.IQVNYSE
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $361.26 per share(market-calibrated)
+107.3%
Upside to Fair Value
Current
$174.27
Pure Model
$381.11
Fair Value
$361.26
Bull Case
$499.76
Bear Case
$279.55
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: $381.11.
What's Driving This Ratingfor IQV
↓
CapEx normalizing toward maintenance
Historical CapEx is 3.88% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$100M in annual FCF. This is the biggest driver of long-term cash flow improvement.
↑
Margin expansion modeled
Current EBIT margin is 13.36% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.6B (17.82% margin).
→
Moderate revenue growth
Analyst consensus projects 5.70% revenue growth, fading to 3.00% by Year 10. Revenue reaches $26.0B (vs $16.3B today).
↔
Perpetuity and exit methods disagree
Perpetuity growth gives $302.15/share (20.2x terminal FCF) while exit multiple gives $460.06/share (32.6x 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 73.60% indicates efficient cash generation. FCF reaches $4.8B by Year 10 (18.33% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.41
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)10.85%
Cost of Debt
Pre-tax Cost of Debt3.54%
Tax Rate15.62%
After-tax Cost of Debt2.99%
Equity Weight (E/V)64.94%
Debt Weight (D/V)35.06%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (64.94% × 10.85%) + (35.06% × 2.99%)
= 8.09%
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 | $17.2B | $19.3B | $21.6B | $23.5B | $26.0B |
| EBIT | $2.3B | $2.6B | $2.9B | $3.7B | $4.6B |
| Tax | $360M | $404M | $450M | $579M | $725M |
| NOPAT | $1.9B | $2.2B | $2.4B | $3.1B | $3.9B |
| + Depreciation | $1.2B | $1.4B | $1.5B | $1.7B | $1.8B |
| - Capex | $670M | $735M | $801M | $854M | $911M |
| - Δ NWC | $93M | $111M | $105M | $96M | $76M |
| Free Cash Flow | $2.4B | $2.7B | $3.1B | $3.8B | $4.8B |
| Discount Factor | 0.925 | 0.792 | 0.678 | 0.580 | 0.459 |
| Present Value | $2.2B | $2.1B | $2.1B | $2.2B | $2.2B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$4.8B
Terminal Growth Rate3.00%
WACC8.09%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$96.5B
PV of Terminal Value$44.3B
Exit Multiple Method
Year 10 EBITDA$6.5B
Exit Multiple (EV/EBITDA)24.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$155.7B
PV of Terminal Value$71.5B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$21.8B
PV of Terminal Value$44.3B
Enterprise Value$66.1B
(-) Net Debt$14.2B
Equity Value$51.9B
Shares Outstanding172M
Price per Share$302.15
Exit Multiple Method
PV of Projected FCFs$21.8B
PV of Terminal Value$71.5B
Enterprise Value$93.3B
(-) Net Debt$14.2B
Equity Value$79.1B
Shares Outstanding172M
Price per Share$460.06
Pure Model Fair Value
$381.11
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% |
|---|---|---|---|---|---|
| 6.09% | $500.37 | $528.10 | $564.80 | $615.65 | $690.80 |
| 7.09% | $419.28 | $435.30 | $455.23 | $480.71 | $514.44 |
| 8.09% | $358.89 | $369.01 | $381.11 | $395.84 | $414.18 |
| 9.09% | $311.24 | $318.02 | $325.92 | $335.23 | $346.36 |
| 10.09% | $272.16 | $276.92 | $282.35 | $288.60 | $295.87 |
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
$279.55
60.4% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.5%
- • Beta: 1.76
Base Case
$381.11
118.7% vs current
- • Analyst consensus
- • Terminal growth: 3.0%
- • Beta: 1.41
Bull Case
$499.76
186.8% vs current
- • +25% vs analyst consensus
- • Terminal growth: 3.5%
- • Beta: 1.20
Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth5.70%
Year 3 Revenue Growth6.07%
Year 5 Revenue Growth5.12%
Year 7 Revenue Growth4.27%
Year 10 Revenue Growth3.00%
Terminal Growth Rate3.00%
Margin & Efficiency
Current EBIT Margin13.36%
Terminal EBIT Margin20.00%
Tax Rate15.62%
Historical Capex / Rev3.88%
Terminal Capex / Rev3.50%
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.