Masco CorporationMASNYSE

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: $98.93 per share(market-calibrated)

+41.7%

Upside to Fair Value

Current

$69.80

Pure Model

$100.59

Fair Value

$98.93

Bull Case

$118.93

Bear Case

$82.75

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

0.50%

Calibrated Growth

1.81%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $100.59.

What's Driving This Ratingfor MAS

✓

CapEx already efficient

CapEx at 2.43% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 23.13% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 1.76% revenue growth, fading to 2.25% by Year 10. Revenue reaches $9.6B (vs $7.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $81.73/share (15.4x terminal FCF) while exit multiple gives $119.45/share (26.8x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 175bps below the model's 2.25%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.17% indicates efficient cash generation. FCF reaches $1.6B by Year 10 (16.86% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.28

Market Risk Premium4.50%

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

Cost of Equity (Re)10.28%

Cost of Debt

Pre-tax Cost of Debt4.03%

Tax Rate24.41%

After-tax Cost of Debt3.04%

Equity Weight (E/V)80.94%

Debt Weight (D/V)19.06%

WACC Calculation

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

WACC = (80.94% × 10.28%) + (19.06% × 3.04%)

= 8.90%

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	$7.7B	$8.2B	$8.6B	$9.0B	$9.6B
EBIT	$1.8B	$1.9B	$2.0B	$2.1B	$2.2B
Tax	$434M	$465M	$485M	$507M	$542M
NOPAT	$1.3B	$1.4B	$1.5B	$1.6B	$1.7B
+ Depreciation	$151M	$162M	$169M	$176M	$189M
- Capex	$187M	$200M	$209M	$218M	$233M
- Δ NWC	$10M	$21M	$14M	$15M	$16M
Free Cash Flow	$1.3B	$1.4B	$1.4B	$1.5B	$1.6B
Discount Factor	0.918	0.774	0.653	0.550	0.426
Present Value	$1.2B	$1.1B	$945M	$833M	$690M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.6B

Terminal Growth Rate2.25%

WACC8.90%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$24.9B

PV of Terminal Value$10.6B

Exit Multiple Method

Year 10 EBITDA$2.4B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$43.4B

PV of Terminal Value$18.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$9.3B

PV of Terminal Value$10.6B

Enterprise Value$19.9B

(-) Net Debt$2.8B

Equity Value$17.1B

Shares Outstanding209M

Price per Share$81.73

Exit Multiple Method

PV of Projected FCFs$9.3B

PV of Terminal Value$18.5B

Enterprise Value$27.8B

(-) Net Debt$2.8B

Equity Value$25.0B

Shares Outstanding209M

Price per Share$119.45

Pure Model Fair Value

$100.59

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
6.90%	$124.19	$127.83	$132.26	$137.76	$144.76
7.90%	$109.16	$111.54	$114.35	$117.70	$121.77
8.90%	$97.06	$98.71	$100.59	$102.79	$105.37
9.90%	$87.02	$88.20	$89.52	$91.04	$92.78
10.90%	$78.50	$79.36	$80.33	$81.41	$82.63

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

$82.75

18.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.61

Base Case

$100.59

44.1% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.28

Bull Case

$118.93

70.4% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.09

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth1.76%

Year 3 Revenue Growth3.51%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin23.13%

Tax Rate24.41%

Historical Capex / Rev2.43%

NWC / Revenue7.43%

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: 18x EV/EBITDA (Industrials 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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