Mohawk Industries, Inc.MHKNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $364.37 per share(market-calibrated)

+220.2%

Upside to Fair Value

Current

$113.80

Pure Model

$387.16

Fair Value

$364.37

Bull Case

$479.68

Bear Case

$306.57

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $387.16.

What's Driving This Ratingfor MHK

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.13% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$162M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 4.49% — below the sector mature average of 12.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.4B (10.03% margin).

→

Moderate revenue growth

Analyst consensus projects 2.45% revenue growth, fading to 3.00% by Year 10. Revenue reaches $14.4B (vs $10.8B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $327.71/share (23.2x terminal FCF) while exit multiple gives $446.61/share (33.6x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% 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 — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 59.49% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.17

Market Risk Premium4.50%

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

Cost of Equity (Re)9.78%

Cost of Debt

Pre-tax Cost of Debt1.83%

Tax Rate21.08%

After-tax Cost of Debt1.45%

Equity Weight (E/V)71.90%

Debt Weight (D/V)28.10%

WACC Calculation

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

WACC = (71.90% × 9.78%) + (28.10% × 1.45%)

= 7.44%

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	$11.0B	$11.8B	$12.4B	$13.2B	$14.4B
EBIT	$497M	$532M	$745M	$1.1B	$1.4B
Tax	$105M	$112M	$157M	$227M	$305M
NOPAT	$392M	$420M	$588M	$849M	$1.1B
+ Depreciation	$767M	$821M	$862M	$915M	$999M
- Capex	$566M	$577M	$575M	$577M	$576M
- Δ NWC	$69M	$113M	$94M	$100M	$109M
Free Cash Flow	$523M	$550M	$781M	$1.1B	$1.5B
Discount Factor	0.931	0.806	0.699	0.605	0.488
Present Value	$487M	$444M	$545M	$657M	$710M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.5B

Terminal Growth Rate3.00%

WACC7.44%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$33.8B

PV of Terminal Value$16.5B

Exit Multiple Method

Year 10 EBITDA$2.4B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$48.9B

PV of Terminal Value$23.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$5.8B

PV of Terminal Value$16.5B

Enterprise Value$22.3B

(-) Net Debt$1.9B

Equity Value$20.4B

Shares Outstanding62M

Price per Share$327.71

Exit Multiple Method

PV of Projected FCFs$5.8B

PV of Terminal Value$23.9B

Enterprise Value$29.6B

(-) Net Debt$1.9B

Equity Value$27.7B

Shares Outstanding62M

Price per Share$446.61

Pure Model Fair Value

$387.16

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
5.44%	$510.07	$546.08	$596.87	$658.41	$630.06
6.44%	$422.97	$442.08	$466.76	$499.83	$546.48
7.44%	$361.71	$373.15	$387.16	$404.73	$427.41
8.44%	$315.07	$322.45	$331.20	$341.72	$354.61
9.44%	$277.73	$282.77	$288.59	$295.39	$303.45

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

$306.57

169.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.47

Base Case

$387.16

240.2% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.17

Bull Case

$479.68

321.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.00

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.45%

Year 3 Revenue Growth3.82%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin4.49%

Terminal EBIT Margin12.00%

Tax Rate21.08%

Historical Capex / Rev5.13%

Terminal Capex / Rev4.00%

NWC / Revenue26.08%

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 Cyclical 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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