MSCI Inc.MSCINYSE

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

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $375.59 per share(market-calibrated)

-34.6%

Upside to Fair Value

Current

$573.88

Pure Model

$359.02

Fair Value

$375.59

Bull Case

$480.86

Bear Case

$255.52

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

5.56%

Calibrated Growth

3.27%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $359.02.

What's Driving This Ratingfor MSCI

↓

CapEx normalizing toward maintenance

Historical CapEx is 1.85% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$20M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 59.03% 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.

↑

Strong near-term revenue growth

Analyst consensus projects 10.04% revenue growth in Year 1, fading to 7.86% by Year 5 and 2.50% by Year 10. Revenue reaches $5.9B by Year 10 (vs $3.1B today).

🎯

Market pricing in higher long-term growth

To justify $573.88, the market implies 5.56% perpetual growth — 306bps above the model's 2.50%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 79.42% indicates efficient cash generation. FCF reaches $3.0B by Year 10 (51.24% 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)10.26%

Cost of Debt

Pre-tax Cost of Debt2.89%

Tax Rate19.54%

After-tax Cost of Debt2.33%

Equity Weight (E/V)87.53%

Debt Weight (D/V)12.47%

WACC Calculation

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

WACC = (87.53% × 10.26%) + (12.47% × 2.33%)

= 9.27%

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	$3.4B	$4.1B	$4.7B	$5.3B	$5.9B
EBIT	$2.0B	$2.4B	$2.8B	$3.1B	$3.5B
Tax	$398M	$469M	$542M	$611M	$679M
NOPAT	$1.6B	$1.9B	$2.2B	$2.5B	$2.8B
+ Depreciation	$189M	$223M	$258M	$291M	$323M
- Capex	$64M	$72M	$80M	$86M	$88M
- Δ NWC	$31M	$32M	$34M	$29M	$14M
Free Cash Flow	$1.7B	$2.0B	$2.4B	$2.7B	$3.0B
Discount Factor	0.915	0.766	0.642	0.537	0.412
Present Value	$1.6B	$1.6B	$1.5B	$1.4B	$1.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.0B

Terminal Growth Rate2.50%

WACC9.27%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$45.7B

PV of Terminal Value$18.8B

Exit Multiple Method

Year 10 EBITDA$3.8B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$45.6B

PV of Terminal Value$18.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$14.7B

PV of Terminal Value$18.8B

Enterprise Value$33.5B

(-) Net Debt$5.8B

Equity Value$27.7B

Shares Outstanding77M

Price per Share$359.19

Exit Multiple Method

PV of Projected FCFs$14.7B

PV of Terminal Value$18.8B

Enterprise Value$33.5B

(-) Net Debt$5.8B

Equity Value$27.7B

Shares Outstanding77M

Price per Share$358.86

Pure Model Fair Value

$359.02

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%
7.27%	$452.01	$469.07	$489.70	$515.17	$547.38
8.27%	$390.74	$401.99	$415.18	$430.88	$449.86
9.27%	$342.31	$350.09	$359.02	$369.37	$381.52
10.27%	$302.71	$308.29	$314.59	$321.76	$329.99
11.27%	$269.52	$273.64	$278.23	$283.38	$289.19

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

$255.52

-55.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.60

Base Case

$359.02

-37.4% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.28

Bull Case

$480.86

-16.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 1.09

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.04%

Year 3 Revenue Growth8.56%

Year 5 Revenue Growth7.86%

Year 7 Revenue Growth5.71%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin59.03%

Tax Rate19.54%

Historical Capex / Rev1.85%

Terminal Capex / Rev1.50%

NWC / Revenue10.00%

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: 12x EV/EBITDA (Financial Services 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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