Kenvue Inc.KVUENYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $25.63 per share(market-calibrated)

+40.1%

Upside to Fair Value

Current

$18.29

Pure Model

$27.53

Fair Value

$25.63

Bull Case

$33.68

Bear Case

$22.51

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $27.53.

What's Driving This Ratingfor KVUE

✓

CapEx already efficient

CapEx at 2.71% 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 16.25% — below the sector mature average of 17.88%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.1B (16.25% margin).

→

Moderate revenue growth

Analyst consensus projects 2.78% revenue growth, fading to 2.50% by Year 10. Revenue reaches $19.4B (vs $15.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 65.54% indicates efficient cash generation. FCF reaches $2.6B by Year 10 (13.41% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.55

Market Risk Premium4.50%

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

Cost of Equity (Re)6.98%

Cost of Debt

Pre-tax Cost of Debt2.74%

Tax Rate26.46%

After-tax Cost of Debt2.02%

Equity Weight (E/V)80.44%

Debt Weight (D/V)19.56%

WACC Calculation

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

WACC = (80.44% × 6.98%) + (19.56% × 2.02%)

= 6.01%

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	$15.5B	$16.5B	$17.2B	$18.0B	$19.4B
EBIT	$2.5B	$2.7B	$2.8B	$2.9B	$3.1B
Tax	$668M	$708M	$738M	$774M	$832M
NOPAT	$1.9B	$2.0B	$2.1B	$2.2B	$2.3B
+ Depreciation	$654M	$693M	$722M	$757M	$814M
- Capex	$421M	$446M	$465M	$487M	$524M
- Δ NWC	$7M	$9M	$6M	$7M	$8M
Free Cash Flow	$2.1B	$2.2B	$2.3B	$2.4B	$2.6B
Discount Factor	0.943	0.839	0.747	0.665	0.558
Present Value	$2.0B	$1.9B	$1.7B	$1.6B	$1.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.6B

Terminal Growth Rate2.50%

WACC6.01%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$75.8B

PV of Terminal Value$42.3B

Exit Multiple Method

Year 10 EBITDA$4.0B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$79.2B

PV of Terminal Value$44.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.0B

PV of Terminal Value$42.3B

Enterprise Value$59.3B

(-) Net Debt$7.5B

Equity Value$51.8B

Shares Outstanding1.9B

Price per Share$27.04

Exit Multiple Method

PV of Projected FCFs$17.0B

PV of Terminal Value$44.2B

Enterprise Value$61.2B

(-) Net Debt$7.5B

Equity Value$53.7B

Shares Outstanding1.9B

Price per Share$28.02

Pure Model Fair Value

$27.53

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%
4.01%	$38.34	$43.06	$41.31	$39.51	$37.80
5.01%	$30.10	$32.17	$35.06	$39.39	$37.80
6.01%	$25.00	$26.10	$27.53	$29.42	$32.08
7.01%	$21.37	$22.04	$22.86	$23.87	$25.18
8.01%	$18.60	$19.03	$19.55	$20.16	$20.91

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

$22.51

23.1% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.69

Base Case

$27.53

50.5% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.55

Bull Case

$33.68

84.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.47

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.78%

Year 3 Revenue Growth3.49%

Year 5 Revenue Growth2.32%

Year 7 Revenue Growth2.39%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin16.25%

Terminal EBIT Margin17.88%

Tax Rate26.46%

Historical Capex / Rev2.71%

NWC / Revenue1.62%

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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