Lamb Weston Holdings, Inc.LWNYSE
Loading
DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $128.14 per share(market-calibrated)
+162.3%
Upside to Fair Value
Current
$48.86
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)62.58%
Debt Weight (D/V)37.42%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (62.58% × 6.43%) + (37.42% × 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
149.5% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 0.54
Base Case
$141.93
190.5% vs current
- • Analyst consensus
- • Terminal growth: 2.5%
- • Beta: 0.43
Bull Case
$168.39
244.6% 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.