Packaging Corporation of AmericaPKGNYSE
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DCF Valuation
DCF Valuation Summary
Sell
Base Case: $197.36 per share
-19.9%
Upside to Target
Bear Case
$147.28
Base Case
$197.36
Current
$246.31
Bull Case
$268.63
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.90
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)8.54%
Cost of Debt
Pre-tax Cost of Debt2.86%
Tax Rate24.68%
After-tax Cost of Debt2.16%
Equity Weight (E/V)91.03%
Debt Weight (D/V)8.97%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (91.03% × 8.54%) + (8.97% × 2.16%)
= 7.97%
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 | $10.0B | $10.8B | $11.5B | $12.2B | $13.2B |
| EBIT | $1.4B | $1.5B | $1.6B | $1.7B | $1.9B |
| Tax | $352M | $379M | $404M | $427M | $463M |
| NOPAT | $1.1B | $1.2B | $1.2B | $1.3B | $1.4B |
| + Depreciation | $523M | $562M | $600M | $634M | $687M |
| - Capex | $668M | $718M | $767M | $810M | $879M |
| - Δ NWC | $183M | $47M | $54M | $57M | $61M |
| Free Cash Flow | $746M | $951M | $1.0B | $1.1B | $1.2B |
| Discount Factor | 0.926 | 0.795 | 0.682 | 0.585 | 0.465 |
| Present Value | $691M | $756M | $691M | $625M | $539M |
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 Rate4.77%
WACC7.97%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$38.0B
PV of Terminal Value$17.7B
Exit Multiple Method
Year 10 EBITDA$2.6B
Exit Multiple (EV/EBITDA)15.5x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$39.7B
PV of Terminal Value$18.4B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$6.6B
PV of Terminal Value$17.7B
Enterprise Value$24.2B
(-) Net Debt$2.1B
Equity Value$22.2B
Shares Outstanding$114M
Price per Share$193.99
Exit Multiple Method
PV of Projected FCFs$6.6B
PV of Terminal Value$18.4B
Enterprise Value$25.0B
(-) Net Debt$2.1B
Equity Value$22.9B
Shares Outstanding$114M
Price per Share$200.72
Base Case Fair Value
$197.36
Average of perpetuity growth and exit multiple methods
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 3.77% | 4.27% | 4.77% | 5.27% | 5.77% |
|---|---|---|---|---|---|
| 5.97% | $307.90 | $327.76 | $315.86 | $304.50 | $293.66 |
| 6.97% | $207.44 | $239.52 | $286.19 | $304.50 | $293.66 |
| 7.97% | $156.07 | $172.47 | $193.99 | $223.49 | $266.41 |
| 8.97% | $125.34 | $134.94 | $146.82 | $161.91 | $181.73 |
| 9.97% | $105.20 | $111.31 | $118.60 | $127.44 | $138.38 |
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
$147.28
-40.2% vs current
- • -25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 1.12
Base Case
$197.36
-19.9% vs current
- • Analyst consensus
- • Terminal growth: 4.8%
- • Beta: 0.90
Bull Case
$268.63
9.1% vs current
- • +25% vs analyst consensus
- • Terminal growth: 5.3%
- • Beta: 0.76
Key Assumptions & Drivers• Consumer Cyclical Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth11.77%
Year 3 Revenue Growth2.59%
Year 5 Revenue Growth2.75%
Year 7 Revenue Growth2.75%
Year 10 Revenue Growth2.75%
Terminal Growth Rate4.77%
Margin & Efficiency
EBIT Margin14.20%
Tax Rate24.68%
Capex / Revenue6.65%
NWC / Revenue17.34%
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 (S&P 500: 22x P/E)
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.