Jacobs Solutions Inc.JNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $465.77 per share(market-calibrated)

+235.4%

Upside to Fair Value

Current

$138.88

Pure Model

$510.51

Fair Value

$465.77

Bull Case

$667.66

Bear Case

$389.72

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $510.51.

What's Driving This Ratingfor J

✓

CapEx already efficient

CapEx at 0.93% 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 6.33% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.0B (21.09% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 11.56% revenue growth in Year 1, fading to 3.75% by Year 5 and 3.75% by Year 10. Revenue reaches $19.1B by Year 10 (vs $12.0B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.62% indicates efficient cash generation. FCF reaches $3.0B by Year 10 (15.57% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.77

Market Risk Premium4.50%

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

Cost of Equity (Re)7.95%

Cost of Debt

Pre-tax Cost of Debt4.84%

Tax Rate30.00%

After-tax Cost of Debt3.39%

Equity Weight (E/V)86.02%

Debt Weight (D/V)13.98%

WACC Calculation

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

WACC = (86.02% × 7.95%) + (13.98% × 3.39%)

= 7.31%

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	$13.4B	$14.7B	$15.9B	$17.1B	$19.1B
EBIT	$850M	$934M	$2.1B	$3.0B	$4.0B
Tax	$255M	$280M	$624M	$893M	$1.2B
NOPAT	$595M	$654M	$1.5B	$2.1B	$2.8B
+ Depreciation	$261M	$286M	$309M	$333M	$372M
- Capex	$125M	$137M	$148M	$159M	$178M
- Δ NWC	$78M	$35M	$32M	$35M	$39M
Free Cash Flow	$653M	$768M	$1.6B	$2.2B	$3.0B
Discount Factor	0.932	0.809	0.703	0.610	0.494
Present Value	$608M	$622M	$1.1B	$1.4B	$1.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.0B

Terminal Growth Rate3.75%

WACC7.31%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$86.9B

PV of Terminal Value$42.9B

Exit Multiple Method

Year 10 EBITDA$4.4B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$123.4B

PV of Terminal Value$61.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.8B

PV of Terminal Value$42.9B

Enterprise Value$53.8B

(-) Net Debt$1.5B

Equity Value$52.3B

Shares Outstanding120M

Price per Share$435.34

Exit Multiple Method

PV of Projected FCFs$10.8B

PV of Terminal Value$61.0B

Enterprise Value$71.8B

(-) Net Debt$1.5B

Equity Value$70.3B

Shares Outstanding120M

Price per Share$585.69

Pure Model Fair Value

$510.51

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
5.31%	$693.02	$766.90	$748.92	$717.13	$686.85
6.31%	$556.65	$589.50	$635.19	$703.05	$686.85
7.31%	$469.99	$487.75	$510.51	$540.71	$582.70
8.31%	$407.46	$418.22	$431.33	$447.68	$468.61
9.31%	$358.95	$365.96	$374.23	$384.13	$396.20

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

$389.72

180.6% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 0.96

Base Case

$510.51

267.6% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 0.77

Bull Case

$667.66

380.7% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.65

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth11.56%

Year 3 Revenue Growth4.40%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin6.33%

Terminal EBIT Margin25.00%

Tax Rate30.00%

Historical Capex / Rev0.93%

NWC / Revenue5.61%

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: 28x EV/EBITDA (Technology 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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