TKO Group Holdings, Inc.TKONYSE

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: $669.39 per share(market-calibrated)

+197.6%

Upside to Fair Value

Current

$224.96

Pure Model

$772.19

Fair Value

$669.39

Bull Case

$1,025.02

Bear Case

$596.23

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $772.19.

What's Driving This Ratingfor TKO

✓

CapEx already efficient

CapEx at 1.28% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 25.17% 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.

↑

Strong near-term revenue growth

Analyst consensus projects 23.21% revenue growth in Year 1, fading to 11.58% by Year 5 and 3.00% by Year 10. Revenue reaches $10.1B by Year 10 (vs $4.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $915.73/share (41.2x terminal FCF) while exit multiple gives $628.64/share (25.9x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 84.87% indicates efficient cash generation. FCF reaches $2.6B by Year 10 (25.59% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.23

Market Risk Premium4.50%

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

Cost of Equity (Re)5.55%

Cost of Debt

Pre-tax Cost of Debt4.25%

Tax Rate11.90%

After-tax Cost of Debt3.75%

Equity Weight (E/V)81.73%

Debt Weight (D/V)18.27%

WACC Calculation

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

WACC = (81.73% × 5.55%) + (18.27% × 3.75%)

= 5.50%

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	$5.8B	$7.4B	$7.4B	$8.8B	$10.1B
EBIT	$1.5B	$1.9B	$1.9B	$2.2B	$2.6B
Tax	$175M	$222M	$223M	$264M	$304M
NOPAT	$1.3B	$1.6B	$1.6B	$2.0B	$2.2B
+ Depreciation	$291M	$369M	$371M	$440M	$505M
- Capex	$74M	$95M	$95M	$113M	$129M
- Δ NWC	$110M	$154M	$77M	$67M	$30M
Free Cash Flow	$1.4B	$1.8B	$1.8B	$2.2B	$2.6B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$1.3B	$1.5B	$1.4B	$1.5B	$1.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.6B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$106.9B

PV of Terminal Value$62.6B

Exit Multiple Method

Year 10 EBITDA$3.1B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$67.2B

PV of Terminal Value$39.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$14.7B

PV of Terminal Value$62.6B

Enterprise Value$77.2B

(-) Net Debt$3.2B

Equity Value$74.0B

Shares Outstanding81M

Price per Share$915.73

Exit Multiple Method

PV of Projected FCFs$14.7B

PV of Terminal Value$39.4B

Enterprise Value$54.0B

(-) Net Debt$3.2B

Equity Value$50.8B

Shares Outstanding81M

Price per Share$628.64

Pure Model Fair Value

$772.19

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$990.91	$949.11	$909.28	$871.31	$835.10
4.50%	$841.12	$949.11	$909.28	$871.31	$835.10
5.50%	$658.90	$706.10	$772.19	$871.31	$835.10
6.50%	$547.65	$572.94	$605.46	$648.82	$709.52
7.50%	$469.86	$485.08	$503.68	$526.93	$556.82

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

$596.23

165.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.29

Base Case

$772.19

243.3% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.23

Bull Case

$1,025.02

355.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Communication Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth23.21%

Year 3 Revenue Growth26.20%

Year 5 Revenue Growth11.58%

Year 7 Revenue Growth8.15%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin25.17%

Tax Rate11.90%

Historical Capex / Rev1.28%

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: 22x EV/EBITDA (Communication Services 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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