NXP Semiconductors N.V.NXPINASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $285.94 per share(market-calibrated)

+32.2%

Upside to Fair Value

Current

$216.32

Pure Model

$283.30

Fair Value

$285.94

Bull Case

$369.78

Bear Case

$208.25

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

4.56%

Calibrated Growth

3.95%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $283.30.

What's Driving This Ratingfor NXPI

↓

CapEx normalizing toward maintenance

Historical CapEx is 6.99% of revenue (heavy investment phase). Model fades this to 6.00% by Year 10, freeing up ~$208M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 24.96% — below the sector mature average of 26.98%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $5.2B (24.99% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 10.33% revenue growth in Year 1, fading to 3.75% by Year 5 and 3.75% by Year 10. Revenue reaches $21.0B by Year 10 (vs $12.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $192.55/share (18.2x terminal FCF) while exit multiple gives $374.05/share (42.4x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 4.56% is close to the model's 3.75% (only 81bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.08% indicates efficient cash generation. FCF reaches $4.7B by Year 10 (22.30% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.44

Market Risk Premium4.50%

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

Cost of Equity (Re)10.98%

Cost of Debt

Pre-tax Cost of Debt3.30%

Tax Rate20.25%

After-tax Cost of Debt2.63%

Equity Weight (E/V)81.73%

Debt Weight (D/V)18.27%

WACC Calculation

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

WACC = (81.73% × 10.98%) + (18.27% × 2.63%)

= 9.45%

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	$13.5B	$16.0B	$17.5B	$18.8B	$21.0B
EBIT	$3.4B	$4.0B	$4.4B	$4.7B	$5.2B
Tax	$684M	$807M	$883M	$950M	$1.1B
NOPAT	$2.7B	$3.2B	$3.5B	$3.7B	$4.2B
+ Depreciation	$1.2B	$1.4B	$1.5B	$1.6B	$1.8B
- Capex	$946M	$1.1B	$1.1B	$1.2B	$1.3B
- Δ NWC	$137M	$113M	$68M	$73M	$82M
Free Cash Flow	$2.8B	$3.4B	$3.8B	$4.1B	$4.7B
Discount Factor	0.914	0.763	0.637	0.531	0.405
Present Value	$2.6B	$2.6B	$2.4B	$2.2B	$1.9B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.7B

Terminal Growth Rate3.75%

WACC9.45%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$85.1B

PV of Terminal Value$34.5B

Exit Multiple Method

Year 10 EBITDA$7.1B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$198.3B

PV of Terminal Value$80.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$23.1B

PV of Terminal Value$34.5B

Enterprise Value$57.6B

(-) Net Debt$9.0B

Equity Value$48.7B

Shares Outstanding253M

Price per Share$192.55

Exit Multiple Method

PV of Projected FCFs$23.1B

PV of Terminal Value$80.4B

Enterprise Value$103.5B

(-) Net Debt$9.0B

Equity Value$94.5B

Shares Outstanding253M

Price per Share$374.05

Pure Model Fair Value

$283.30

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
7.45%	$355.15	$367.41	$382.97	$403.39	$431.36
8.45%	$308.93	$316.44	$325.55	$336.82	$351.14
9.45%	$272.56	$277.50	$283.30	$290.21	$298.60
10.45%	$242.72	$246.13	$250.05	$254.60	$259.94
11.45%	$217.56	$220.00	$222.76	$225.91	$229.52

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

$208.25

-3.7% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.80

Base Case

$283.30

31.0% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.44

Bull Case

$369.78

70.9% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.22

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth10.33%

Year 3 Revenue Growth6.99%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin24.96%

Terminal EBIT Margin26.98%

Tax Rate20.25%

Historical Capex / Rev6.99%

Terminal Capex / Rev6.00%

NWC / Revenue10.81%

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: 28x EV/EBITDA (Technology 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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