Republic Services, Inc.RSGNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $308.41 per share(market-calibrated)

+33.2%

Upside to Fair Value

Current

$231.57

Pure Model

$316.74

Fair Value

$308.41

Bull Case

$375.69

Bear Case

$267.29

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

0.50%

Calibrated Growth

1.81%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $316.74.

What's Driving This Ratingfor RSG

↓

CapEx normalizing toward maintenance

Historical CapEx is 9.82% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$1.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 24.28% 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.

→

Moderate revenue growth

Analyst consensus projects 3.25% revenue growth, fading to 2.25% by Year 10. Revenue reaches $24.1B (vs $16.6B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 175bps below the model's 2.25%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 76.50% indicates efficient cash generation. FCF reaches $6.3B by Year 10 (25.97% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.52

Market Risk Premium4.50%

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

Cost of Equity (Re)6.84%

Cost of Debt

Pre-tax Cost of Debt78.66%

Tax Rate17.54%

After-tax Cost of Debt64.86%

Equity Weight (E/V)99.18%

Debt Weight (D/V)0.82%

WACC Calculation

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

WACC = (99.18% × 6.84%) + (0.82% × 64.86%)

= 7.32%

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	$17.1B	$18.8B	$20.8B	$22.3B	$24.1B
EBIT	$4.2B	$4.6B	$5.0B	$5.4B	$5.9B
Tax	$730M	$800M	$884M	$949M	$1.0B
NOPAT	$3.4B	$3.8B	$4.2B	$4.5B	$4.8B
+ Depreciation	$1.7B	$1.8B	$2.0B	$2.2B	$2.3B
- Capex	$1.7B	$1.6B	$1.5B	$1.2B	$844M
- Δ NWC	$54M	$82M	$84M	$74M	$53M
Free Cash Flow	$3.4B	$3.9B	$4.6B	$5.3B	$6.3B
Discount Factor	0.932	0.809	0.702	0.610	0.493
Present Value	$3.1B	$3.2B	$3.2B	$3.2B	$3.1B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.3B

Terminal Growth Rate2.25%

WACC7.32%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$126.3B

PV of Terminal Value$62.3B

Exit Multiple Method

Year 10 EBITDA$8.2B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$147.3B

PV of Terminal Value$72.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$31.8B

PV of Terminal Value$62.3B

Enterprise Value$94.1B

(-) Net Debt$520M

Equity Value$93.6B

Shares Outstanding312M

Price per Share$300.10

Exit Multiple Method

PV of Projected FCFs$31.8B

PV of Terminal Value$72.7B

Enterprise Value$104.5B

(-) Net Debt$520M

Equity Value$104.0B

Shares Outstanding312M

Price per Share$333.38

Pure Model Fair Value

$316.74

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%
5.32%	$400.98	$422.65	$451.38	$491.30	$550.51
6.32%	$342.33	$354.82	$370.37	$390.27	$416.66
7.32%	$299.46	$307.33	$316.74	$328.21	$342.51
8.32%	$266.13	$271.40	$277.53	$284.76	$293.42
9.32%	$239.14	$242.82	$247.03	$251.88	$257.52

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

$267.29

15.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.65

Base Case

$316.74

36.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.52

Bull Case

$375.69

62.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.44

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.25%

Year 3 Revenue Growth4.58%

Year 5 Revenue Growth4.24%

Year 7 Revenue Growth3.44%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin24.28%

Tax Rate17.54%

Historical Capex / Rev9.82%

Terminal Capex / Rev3.50%

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: 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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