Rockwell Automation, Inc.ROKNYSE

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: $194.28 per share(market-calibrated)

-52.9%

Upside to Fair Value

Current

$412.15

Pure Model

$178.35

Fair Value

$194.28

Bull Case

$231.88

Bear Case

$130.65

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

8.70%

Calibrated Growth

4.51%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $178.35.

What's Driving This Ratingfor ROK

✓

CapEx already efficient

CapEx at 2.00% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 15.83% — below the sector mature average of 17.06%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.4B (15.83% margin).

→

Moderate revenue growth

Analyst consensus projects 6.23% revenue growth, fading to 2.25% by Year 10. Revenue reaches $15.2B (vs $8.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $135.93/share (12.0x terminal FCF) while exit multiple gives $220.78/share (24.5x 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 $412.15, the market implies 8.70% perpetual growth — 645bps above the model's 2.25%. 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 73.34% indicates efficient cash generation. FCF reaches $2.1B by Year 10 (13.93% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.53

Market Risk Premium4.50%

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

Cost of Equity (Re)11.37%

Cost of Debt

Pre-tax Cost of Debt3.57%

Tax Rate18.32%

After-tax Cost of Debt2.91%

Equity Weight (E/V)92.72%

Debt Weight (D/V)7.28%

WACC Calculation

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

WACC = (92.72% × 11.37%) + (7.28% × 2.91%)

= 10.76%

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	$8.9B	$10.0B	$11.7B	$13.6B	$15.2B
EBIT	$1.4B	$1.6B	$1.8B	$2.2B	$2.4B
Tax	$257M	$290M	$338M	$394M	$442M
NOPAT	$1.1B	$1.3B	$1.5B	$1.8B	$2.0B
+ Depreciation	$281M	$316M	$369M	$430M	$482M
- Capex	$177M	$199M	$233M	$271M	$304M
- Δ NWC	$40M	$45M	$84M	$69M	$26M
Free Cash Flow	$1.2B	$1.4B	$1.6B	$1.8B	$2.1B
Discount Factor	0.903	0.736	0.600	0.489	0.360
Present Value	$1.1B	$1.0B	$936M	$903M	$764M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.1B

Terminal Growth Rate2.25%

WACC10.76%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$25.5B

PV of Terminal Value$9.2B

Exit Multiple Method

Year 10 EBITDA$2.9B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$52.1B

PV of Terminal Value$18.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$9.3B

PV of Terminal Value$9.2B

Enterprise Value$18.5B

(-) Net Debt$3.2B

Equity Value$15.3B

Shares Outstanding113M

Price per Share$135.93

Exit Multiple Method

PV of Projected FCFs$9.3B

PV of Terminal Value$18.7B

Enterprise Value$28.1B

(-) Net Debt$3.2B

Equity Value$24.9B

Shares Outstanding113M

Price per Share$220.78

Pure Model Fair Value

$178.35

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%
8.76%	$217.44	$221.65	$226.50	$232.16	$238.84
9.76%	$193.71	$196.70	$200.09	$203.96	$208.43
10.76%	$173.71	$175.91	$178.35	$181.11	$184.23
11.76%	$156.57	$158.21	$160.03	$162.05	$164.31
12.76%	$141.67	$142.93	$144.31	$145.83	$147.51

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

$130.65

-68.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.91

Base Case

$178.35

-56.7% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.53

Bull Case

$231.88

-43.7% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.23%

Year 3 Revenue Growth6.35%

Year 5 Revenue Growth10.41%

Year 7 Revenue Growth7.15%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin15.83%

Terminal EBIT Margin17.06%

Tax Rate18.32%

Historical Capex / Rev2.00%

NWC / Revenue7.61%

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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