Trimble Inc.TRMBNASDAQ

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $74.04 per share(market-calibrated)

+5.9%

Upside to Fair Value

Current

$69.94

Pure Model

$73.10

Fair Value

$74.04

Bull Case

$92.42

Bear Case

$55.30

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

6.56%

Calibrated Growth

4.17%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $73.10.

What's Driving This Ratingfor TRMB

✓

CapEx already efficient

CapEx at 2.33% 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 24.00% 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 -0.57% revenue growth, fading to 3.75% by Year 10. Revenue reaches $5.9B (vs $3.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $50.80/share (14.1x terminal FCF) while exit multiple gives $95.40/share (35.8x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $69.94, the market implies 6.56% perpetual growth — 281bps above the model's 3.75%. 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 78.16% indicates efficient cash generation. FCF reaches $1.4B by Year 10 (23.84% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.57

Market Risk Premium4.50%

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

Cost of Equity (Re)11.58%

Cost of Debt

Pre-tax Cost of Debt6.65%

Tax Rate16.76%

After-tax Cost of Debt5.53%

Equity Weight (E/V)92.26%

Debt Weight (D/V)7.74%

WACC Calculation

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

WACC = (92.26% × 11.58%) + (7.74% × 5.53%)

= 11.11%

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	$3.6B	$4.2B	$4.9B	$5.2B	$5.9B
EBIT	$856M	$1.0B	$1.2B	$1.3B	$1.4B
Tax	$143M	$168M	$198M	$215M	$243M
NOPAT	$712M	$834M	$982M	$1.1B	$1.2B
+ Depreciation	$206M	$241M	$281M	$303M	$338M
- Capex	$83M	$97M	$114M	$122M	$137M
- Δ NWC	-$1M	$16M	$9M	$10M	$11M
Free Cash Flow	$836M	$961M	$1.1B	$1.2B	$1.4B
Discount Factor	0.900	0.729	0.590	0.478	0.349
Present Value	$752M	$701M	$673M	$593M	$487M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.4B

Terminal Growth Rate3.75%

WACC11.11%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$19.7B

PV of Terminal Value$6.9B

Exit Multiple Method

Year 10 EBITDA$1.8B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$50.1B

PV of Terminal Value$17.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.3B

PV of Terminal Value$6.9B

Enterprise Value$13.2B

(-) Net Debt$1.1B

Equity Value$12.1B

Shares Outstanding237M

Price per Share$50.80

Exit Multiple Method

PV of Projected FCFs$6.3B

PV of Terminal Value$17.4B

Enterprise Value$23.8B

(-) Net Debt$1.1B

Equity Value$22.6B

Shares Outstanding237M

Price per Share$95.40

Pure Model Fair Value

$73.10

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
9.11%	$88.47	$90.26	$92.40	$94.97	$98.13
10.11%	$79.07	$80.29	$81.70	$83.36	$85.32
11.11%	$71.25	$72.12	$73.10	$74.23	$75.53
12.11%	$64.60	$65.24	$65.95	$66.75	$67.65
13.11%	$58.86	$59.33	$59.86	$60.44	$61.10

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

$55.30

-20.9% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.97

Base Case

$73.10

4.5% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.57

Bull Case

$92.42

32.1% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.34

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.57%

Year 3 Revenue Growth8.17%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin24.00%

Terminal EBIT Margin25.00%

Tax Rate16.76%

Historical Capex / Rev2.33%

NWC / Revenue5.14%

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: 28x EV/EBITDA (Technology 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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