T. Rowe Price Group, Inc.TROWNASDAQ

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: $153.02 per share(market-calibrated)

+61.2%

Upside to Fair Value

Current

$94.92

Pure Model

$155.60

Fair Value

$153.02

Bull Case

$182.64

Bear Case

$128.61

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $155.60.

What's Driving This Ratingfor TROW

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.05% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$250M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 37.35% 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 5.07% revenue growth, fading to 2.50% by Year 10. Revenue reaches $9.8B (vs $7.3B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 76.57% indicates efficient cash generation. FCF reaches $3.3B by Year 10 (33.71% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.54

Market Risk Premium4.50%

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

Cost of Equity (Re)11.45%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate23.20%

After-tax Cost of Debt0.00%

Equity Weight (E/V)96.11%

Debt Weight (D/V)3.89%

WACC Calculation

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

WACC = (96.11% × 11.45%) + (3.89% × 0.00%)

= 11.00%

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	$7.7B	$8.0B	$8.7B	$9.1B	$9.8B
EBIT	$2.9B	$3.0B	$3.2B	$3.4B	$3.7B
Tax	$666M	$695M	$750M	$788M	$849M
NOPAT	$2.2B	$2.3B	$2.5B	$2.6B	$2.8B
+ Depreciation	$513M	$535M	$578M	$607M	$654M
- Capex	$311M	$280M	$253M	$214M	$147M
- Δ NWC	$23M	$10M	$13M	$14M	$15M
Free Cash Flow	$2.4B	$2.5B	$2.8B	$3.0B	$3.3B
Discount Factor	0.901	0.731	0.593	0.482	0.352
Present Value	$2.1B	$1.9B	$1.7B	$1.4B	$1.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.3B

Terminal Growth Rate2.50%

WACC11.00%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$39.8B

PV of Terminal Value$14.0B

Exit Multiple Method

Year 10 EBITDA$4.3B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$51.8B

PV of Terminal Value$18.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$16.2B

PV of Terminal Value$14.0B

Enterprise Value$30.2B

(-) Net Debt-$2.5B

Equity Value$32.7B

Shares Outstanding224M

Price per Share$146.20

Exit Multiple Method

PV of Projected FCFs$16.2B

PV of Terminal Value$18.2B

Enterprise Value$34.4B

(-) Net Debt-$2.5B

Equity Value$36.9B

Shares Outstanding224M

Price per Share$165.00

Pure Model Fair Value

$155.60

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
9.00%	$181.47	$184.70	$188.43	$192.78	$197.92
10.00%	$165.43	$167.73	$170.33	$173.31	$176.74
11.00%	$152.03	$153.72	$155.60	$157.72	$160.12
12.00%	$140.63	$141.89	$143.29	$144.85	$146.58
13.00%	$130.77	$131.74	$132.80	$133.97	$135.26

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

$128.61

35.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.93

Base Case

$155.60

63.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.54

Bull Case

$182.64

92.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 1.31

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.07%

Year 3 Revenue Growth2.09%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin37.35%

Tax Rate23.20%

Historical Capex / Rev4.05%

Terminal Capex / Rev1.50%

NWC / Revenue6.16%

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: 12x EV/EBITDA (Financial 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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