Stanley Black & Decker, Inc.SWKNYSE

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

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $127.37 per share(market-calibrated)

+51.6%

Upside to Fair Value

Current

$84.04

Pure Model

$131.52

Fair Value

$127.37

Bull Case

$158.41

Bear Case

$105.87

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

0.50%

Calibrated Growth

1.64%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $131.52.

What's Driving This Ratingfor SWK

✓

CapEx already efficient

CapEx at 2.68% 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 5.10% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.1B (10.41% margin).

→

Moderate revenue growth

Analyst consensus projects 0.59% revenue growth, fading to 2.25% by Year 10. Revenue reaches $19.7B (vs $15.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $106.51/share (15.4x terminal FCF) while exit multiple gives $156.52/share (23.8x 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 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 75.65% indicates efficient cash generation. FCF reaches $2.1B by Year 10 (10.75% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.20

Market Risk Premium4.50%

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

Cost of Equity (Re)9.92%

Cost of Debt

Pre-tax Cost of Debt6.98%

Tax Rate5.00%

After-tax Cost of Debt6.63%

Equity Weight (E/V)68.46%

Debt Weight (D/V)31.54%

WACC Calculation

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

WACC = (68.46% × 9.92%) + (31.54% × 6.63%)

= 8.88%

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	$15.2B	$15.6B	$16.8B	$18.2B	$19.7B
EBIT	$776M	$795M	$859M	$1.4B	$2.1B
Tax	$39M	$40M	$43M	$72M	$103M
NOPAT	$737M	$755M	$816M	$1.4B	$1.9B
+ Depreciation	$579M	$592M	$640M	$691M	$749M
- Capex	$407M	$417M	$451M	$487M	$527M
- Δ NWC	$11M	$38M	$88M	$76M	$52M
Free Cash Flow	$898M	$892M	$917M	$1.5B	$2.1B
Discount Factor	0.918	0.775	0.653	0.551	0.427
Present Value	$824M	$691M	$599M	$827M	$904M

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%

WACC8.88%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$32.7B

PV of Terminal Value$13.9B

Exit Multiple Method

Year 10 EBITDA$2.8B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$50.4B

PV of Terminal Value$21.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.8B

PV of Terminal Value$13.9B

Enterprise Value$21.7B

(-) Net Debt$5.6B

Equity Value$16.1B

Shares Outstanding151M

Price per Share$106.51

Exit Multiple Method

PV of Projected FCFs$7.8B

PV of Terminal Value$21.5B

Enterprise Value$29.3B

(-) Net Debt$5.6B

Equity Value$23.7B

Shares Outstanding151M

Price per Share$156.52

Pure Model Fair Value

$131.52

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%
6.88%	$170.39	$177.03	$185.12	$195.15	$207.95
7.88%	$145.14	$149.48	$154.60	$160.71	$168.14
8.88%	$125.09	$128.08	$131.52	$135.51	$140.22
9.88%	$108.64	$110.77	$113.19	$115.94	$119.10
10.88%	$94.82	$96.39	$98.14	$100.10	$102.33

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

$105.87

26.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.50

Base Case

$131.52

56.5% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.20

Bull Case

$158.41

88.5% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.02

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.59%

Year 3 Revenue Growth2.07%

Year 5 Revenue Growth4.58%

Year 7 Revenue Growth3.65%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin5.10%

Terminal EBIT Margin13.00%

Tax Rate5.00%

Historical Capex / Rev2.68%

NWC / Revenue11.97%

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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