Loews CorporationLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $354.43 per share(market-calibrated)

+217.9%

Upside to Fair Value

Current

$111.50

Pure Model

$388.53

Fair Value

$354.43

Bull Case

$487.15

Bear Case

$309.91

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: $388.53.

What's Driving This Ratingfor L

↓

CapEx normalizing toward maintenance

Historical CapEx is 3.34% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$429M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 12.56% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $6.5B (28.00% margin).

→

Moderate revenue growth

Historical trends suggest 2.50% revenue growth, fading to 2.50% by Year 10. Revenue reaches $23.3B (vs $18.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $476.67/share (28.4x terminal FCF) while exit multiple gives $300.40/share (16.1x terminal FCF). The base case averages both methods.

🎯

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 74.71% indicates efficient cash generation. FCF reaches $5.4B by Year 10 (23.18% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.60

Market Risk Premium4.50%

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

Cost of Equity (Re)7.22%

Cost of Debt

Pre-tax Cost of Debt4.33%

Tax Rate22.38%

After-tax Cost of Debt3.36%

Equity Weight (E/V)71.07%

Debt Weight (D/V)28.93%

WACC Calculation

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

WACC = (71.07% × 7.22%) + (28.93% × 3.36%)

= 6.11%

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	$18.6B	$19.6B	$20.6B	$21.6B	$23.3B
EBIT	$2.3B	$3.1B	$4.0B	$4.9B	$6.5B
Tax	$524M	$701M	$894M	$1.1B	$1.5B
NOPAT	$1.8B	$2.4B	$3.1B	$3.8B	$5.1B
+ Depreciation	$565M	$593M	$623M	$655M	$705M
- Capex	$623M	$574M	$519M	$457M	$349M
- Δ NWC	$15M	$16M	$17M	$18M	$19M
Free Cash Flow	$1.7B	$2.4B	$3.2B	$4.0B	$5.4B
Discount Factor	0.942	0.837	0.744	0.660	0.553
Present Value	$1.6B	$2.0B	$2.4B	$2.7B	$3.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.4B

Terminal Growth Rate2.50%

WACC6.11%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$153.3B

PV of Terminal Value$84.8B

Exit Multiple Method

Year 10 EBITDA$7.2B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$86.6B

PV of Terminal Value$47.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$23.9B

PV of Terminal Value$84.8B

Enterprise Value$108.7B

(-) Net Debt$9.0B

Equity Value$99.7B

Shares Outstanding209M

Price per Share$476.67

Exit Multiple Method

PV of Projected FCFs$23.9B

PV of Terminal Value$47.9B

Enterprise Value$71.8B

(-) Net Debt$9.0B

Equity Value$62.8B

Shares Outstanding209M

Price per Share$300.40

Pure Model Fair Value

$388.53

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%
4.11%	$559.81	$641.60	$641.48	$613.80	$587.40
5.11%	$424.61	$461.38	$512.27	$587.31	$587.40
6.11%	$342.99	$362.99	$388.53	$422.31	$469.03
7.11%	$286.92	$299.06	$313.84	$332.22	$355.70
8.11%	$245.25	$253.18	$262.52	$273.69	$287.28

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

$309.91

177.9% vs current

• -25% vs historical growth trends
• Terminal growth: 2.0%
• Beta: 0.76

Base Case

$388.53

248.5% vs current

• Historical growth trends
• Terminal growth: 2.5%
• Beta: 0.60

Bull Case

$487.15

336.9% vs current

• +25% vs historical growth trends
• Terminal growth: 3.0%
• Beta: 0.51

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.50%

Year 3 Revenue Growth2.50%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin12.56%

Terminal EBIT Margin28.00%

Tax Rate22.38%

Historical Capex / Rev3.34%

Terminal Capex / Rev1.50%

NWC / Revenue3.33%

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: 12x EV/EBITDA (Financial Services 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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