Lamb Weston Holdings, Inc.LWNYSE

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

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $128.14 per share(market-calibrated)

+173.9%

Upside to Fair Value

Current

$46.78

Pure Model

$141.93

Fair Value

$128.14

Bull Case

$168.39

Bear Case

$121.91

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: $141.93.

What's Driving This Ratingfor LW

↓

CapEx normalizing toward maintenance

Historical CapEx is 8.24% of revenue (heavy investment phase). Model fades this to 3.00% by Year 10, freeing up ~$455M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 13.41% — below the sector mature average of 16.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.3B (15.15% margin).

→

Moderate revenue growth

Analyst consensus projects 1.30% revenue growth, fading to 2.50% by Year 10. Revenue reaches $8.7B (vs $6.5B 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 60.29% indicates efficient cash generation. FCF reaches $1.0B by Year 10 (11.60% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.43

Market Risk Premium4.50%

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

Cost of Equity (Re)6.43%

Cost of Debt

Pre-tax Cost of Debt3.39%

Tax Rate28.60%

After-tax Cost of Debt2.42%

Equity Weight (E/V)61.55%

Debt Weight (D/V)38.45%

WACC Calculation

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

WACC = (61.55% × 6.43%) + (38.45% × 2.42%)

= 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	$6.5B	$6.6B	$7.2B	$7.9B	$8.7B
EBIT	$876M	$883M	$967M	$1.1B	$1.3B
Tax	$251M	$253M	$277M	$325M	$376M
NOPAT	$626M	$630M	$691M	$810M	$939M
+ Depreciation	$267M	$269M	$295M	$323M	$355M
- Capex	$539M	$466M	$427M	$376M	$261M
- Δ NWC	$10M	$21M	$48M	$42M	$26M
Free Cash Flow	$343M	$413M	$510M	$716M	$1.0B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$325M	$351M	$390M	$492M	$589M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.0B

Terminal Growth Rate2.50%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$34.4B

PV of Terminal Value$20.1B

Exit Multiple Method

Year 10 EBITDA$1.7B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$33.4B

PV of Terminal Value$19.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$4.4B

PV of Terminal Value$20.1B

Enterprise Value$24.6B

(-) Net Debt$4.1B

Equity Value$20.5B

Shares Outstanding142M

Price per Share$143.99

Exit Multiple Method

PV of Projected FCFs$4.4B

PV of Terminal Value$19.6B

Enterprise Value$24.0B

(-) Net Debt$4.1B

Equity Value$19.9B

Shares Outstanding142M

Price per Share$139.87

Pure Model Fair Value

$141.93

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%	$216.89	$206.54	$196.69	$187.31	$178.38
4.50%	$156.98	$172.87	$196.69	$187.31	$178.38
5.50%	$123.71	$131.52	$141.93	$156.51	$178.38
6.50%	$101.49	$105.95	$111.53	$118.71	$128.27
7.50%	$85.09	$87.88	$91.24	$95.35	$100.48

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

$121.91

160.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.54

Base Case

$141.93

203.4% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.43

Bull Case

$168.39

260.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.36

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth1.30%

Year 3 Revenue Growth2.56%

Year 5 Revenue Growth5.70%

Year 7 Revenue Growth4.42%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin13.41%

Terminal EBIT Margin16.00%

Tax Rate28.60%

Historical Capex / Rev8.24%

Terminal Capex / Rev3.00%

NWC / Revenue12.47%

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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