PACCAR IncPCARNASDAQ

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

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $114.25 per share(market-calibrated)

-8.2%

Upside to Fair Value

Current

$124.43

Pure Model

$112.71

Fair Value

$114.25

Bull Case

$127.33

Bear Case

$98.03

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.36%

Calibrated Growth

2.72%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $112.71.

What's Driving This Ratingfor PCAR

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.22% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$636M in annual FCF. This is the biggest driver of long-term cash flow improvement.

→

Moderate revenue growth

Analyst consensus projects -0.27% revenue growth, fading to 2.25% by Year 10. Revenue reaches $37.1B (vs $28.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $89.90/share (14.7x terminal FCF) while exit multiple gives $135.53/share (31.6x 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 higher long-term growth

To justify $124.43, the market implies 5.36% perpetual growth — 311bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 57.01% — 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)1.04

Market Risk Premium4.50%

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

Cost of Equity (Re)9.20%

Cost of Debt

Pre-tax Cost of Debt5.00%

Tax Rate21.42%

After-tax Cost of Debt3.93%

Equity Weight (E/V)100.00%

Debt Weight (D/V)0.00%

WACC Calculation

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

WACC = (100.00% × 9.20%) + (0.00% × 3.93%)

= 9.20%

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	$28.4B	$32.9B	$33.2B	$34.7B	$37.1B
EBIT	$3.7B	$4.3B	$4.4B	$4.6B	$4.9B
Tax	$801M	$928M	$936M	$979M	$1.0B
NOPAT	$2.9B	$3.4B	$3.4B	$3.6B	$3.8B
+ Depreciation	$870M	$1.0B	$1.0B	$1.1B	$1.1B
- Capex	$1.5B	$1.6B	$1.5B	$1.4B	$1.3B
- Δ NWC	-$23M	$532M	$219M	$229M	$245M
Free Cash Flow	$2.4B	$2.3B	$2.8B	$3.0B	$3.4B
Discount Factor	0.916	0.768	0.644	0.540	0.415
Present Value	$2.2B	$1.8B	$1.8B	$1.6B	$1.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.4B

Terminal Growth Rate2.25%

WACC9.20%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$50.5B

PV of Terminal Value$21.0B

Exit Multiple Method

Year 10 EBITDA$6.0B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$108.4B

PV of Terminal Value$45.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.1B

PV of Terminal Value$21.0B

Enterprise Value$38.0B

(-) Net Debt-$9.3B

Equity Value$47.3B

Shares Outstanding526M

Price per Share$89.90

Exit Multiple Method

PV of Projected FCFs$17.1B

PV of Terminal Value$45.0B

Enterprise Value$62.0B

(-) Net Debt-$9.3B

Equity Value$71.3B

Shares Outstanding526M

Price per Share$135.53

Pure Model Fair Value

$112.71

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%
7.20%	$132.54	$135.23	$138.47	$142.43	$147.40
8.20%	$120.15	$121.94	$124.04	$126.51	$129.49
9.20%	$110.04	$111.29	$112.71	$114.36	$116.29
10.20%	$101.55	$102.45	$103.47	$104.62	$105.93
11.20%	$94.29	$94.96	$95.70	$96.53	$97.47

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

$98.03

-21.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.31

Base Case

$112.71

-9.4% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.04

Bull Case

$127.33

2.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.89

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.27%

Year 3 Revenue Growth5.70%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin13.18%

Tax Rate21.42%

Historical Capex / Rev5.22%

Terminal Capex / Rev3.50%

NWC / Revenue30.00%

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: 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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