The Mosaic CompanyMOSNYSE

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DCF Valuation

⚠️Model Warnings

•Revenue projections show 10% decline from peak. Analyst estimates may reflect secular headwinds or transition period.

DCF Valuation Summary

Strong Buy

Fair Value: $46.21 per share(market-calibrated)

+68.0%

Upside to Fair Value

Current

$27.51

Pure Model

$47.11

Fair Value

$46.21

Bull Case

$49.64

Bear Case

$43.60

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

0.50%

Calibrated Growth

1.64%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $47.11.

What's Driving This Ratingfor MOS

↓

CapEx normalizing toward maintenance

Historical CapEx is 10.87% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$699M in annual FCF. This is the biggest driver of long-term cash flow improvement.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 4.59% in Year 1 to -10.06% by Year 5 (per analyst consensus). That's below the 2.25% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $39.38/share (13.9x terminal FCF) while exit multiple gives $54.84/share (23.8x terminal FCF). The 14x 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.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 58.86% — 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)0.96

Market Risk Premium4.50%

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

Cost of Equity (Re)8.82%

Cost of Debt

Pre-tax Cost of Debt26.31%

Tax Rate30.00%

After-tax Cost of Debt18.42%

Equity Weight (E/V)91.99%

Debt Weight (D/V)8.01%

WACC Calculation

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

WACC = (91.99% × 8.82%) + (8.01% × 18.42%)

= 9.59%

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	$12.6B	$12.8B	$11.7B	$10.3B	$10.2B
EBIT	$1.8B	$1.9B	$1.7B	$1.5B	$1.5B
Tax	$549M	$558M	$510M	$447M	$444M
NOPAT	$1.3B	$1.3B	$1.2B	$1.0B	$1.0B
+ Depreciation	$785M	$798M	$729M	$639M	$634M
- Capex	$1.4B	$1.2B	$914M	$645M	$407M
- Δ NWC	$45M	$30M	-$107M	-$45M	$18M
Free Cash Flow	$651M	$874M	$1.1B	$1.1B	$1.2B
Discount Factor	0.912	0.760	0.633	0.527	0.400
Present Value	$594M	$664M	$702M	$570M	$498M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.2B

Terminal Growth Rate2.25%

WACC9.59%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$17.3B

PV of Terminal Value$6.9B

Exit Multiple Method

Year 10 EBITDA$2.1B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$29.6B

PV of Terminal Value$11.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.0B

PV of Terminal Value$6.9B

Enterprise Value$13.0B

(-) Net Debt$483M

Equity Value$12.5B

Shares Outstanding317M

Price per Share$39.38

Exit Multiple Method

PV of Projected FCFs$6.0B

PV of Terminal Value$11.8B

Enterprise Value$17.9B

(-) Net Debt$483M

Equity Value$17.4B

Shares Outstanding317M

Price per Share$54.84

Pure Model Fair Value

$47.11

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%
7.59%	$56.97	$58.34	$59.97	$61.93	$64.34
8.59%	$50.78	$51.71	$52.78	$54.04	$55.54
9.59%	$45.71	$46.36	$47.11	$47.96	$48.95
10.59%	$41.45	$41.93	$42.47	$43.07	$43.76
11.59%	$37.81	$38.17	$38.56	$39.00	$39.50

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

$43.60

58.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.20

Base Case

$47.11

71.2% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.96

Bull Case

$49.64

80.5% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.82

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.59%

Year 3 Revenue Growth2.92%

Year 5 Revenue Growth-10.06%

Year 7 Revenue Growth-5.14%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin14.52%

Tax Rate30.00%

Historical Capex / Rev10.87%

Terminal Capex / Rev4.00%

NWC / Revenue8.16%

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: 14x EV/EBITDA (Basic Materials 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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