Tractor Supply CompanyTSCONASDAQ

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

DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $66.92 per share(market-calibrated)

+28.0%

Upside to Fair Value

Current

$52.28

Pure Model

$67.93

Fair Value

$66.92

Bull Case

$90.93

Bear Case

$50.32

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

2.48%

Calibrated Growth

2.87%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $67.93.

What's Driving This Ratingfor TSCO

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.94% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$239M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 9.97% — below the sector mature average of 12.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.9B (11.33% margin).

→

Moderate revenue growth

Analyst consensus projects 5.22% revenue growth, fading to 3.00% by Year 10. Revenue reaches $25.5B (vs $15.5B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.48% is close to the model's 3.00% (only 52bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 51.88% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.73

Market Risk Premium4.50%

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

Cost of Equity (Re)7.77%

Cost of Debt

Pre-tax Cost of Debt0.77%

Tax Rate21.61%

After-tax Cost of Debt0.60%

Equity Weight (E/V)82.34%

Debt Weight (D/V)17.66%

WACC Calculation

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

WACC = (82.34% × 7.77%) + (17.66% × 0.60%)

= 6.50%

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	$16.3B	$18.6B	$20.8B	$22.9B	$25.5B
EBIT	$1.6B	$1.9B	$2.1B	$2.5B	$2.9B
Tax	$352M	$400M	$449M	$530M	$623M
NOPAT	$1.3B	$1.5B	$1.6B	$1.9B	$2.3B
+ Depreciation	$410M	$466M	$523M	$575M	$639M
- Capex	$807M	$879M	$943M	$989M	$1.0B
- Δ NWC	$59M	$88M	$82M	$74M	$54M
Free Cash Flow	$820M	$950M	$1.1B	$1.4B	$1.8B
Discount Factor	0.939	0.828	0.730	0.643	0.533
Present Value	$770M	$786M	$822M	$924M	$974M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.8B

Terminal Growth Rate3.00%

WACC6.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$53.8B

PV of Terminal Value$28.6B

Exit Multiple Method

Year 10 EBITDA$3.5B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$70.5B

PV of Terminal Value$37.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.7B

PV of Terminal Value$28.6B

Enterprise Value$37.3B

(-) Net Debt$5.7B

Equity Value$31.6B

Shares Outstanding530M

Price per Share$59.53

Exit Multiple Method

PV of Projected FCFs$8.7B

PV of Terminal Value$37.5B

Enterprise Value$46.2B

(-) Net Debt$5.7B

Equity Value$40.4B

Shares Outstanding530M

Price per Share$76.32

Pure Model Fair Value

$67.93

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%
4.50%	$95.48	$107.07	$102.23	$97.57	$93.14
5.50%	$74.73	$79.80	$86.89	$97.53	$93.14
6.50%	$61.72	$64.43	$67.93	$72.58	$79.10
7.50%	$52.41	$54.04	$56.04	$58.53	$61.74
8.50%	$45.22	$46.28	$47.53	$49.04	$50.87

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

$50.32

-3.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.91

Base Case

$67.93

29.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.73

Bull Case

$90.93

73.9% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.62

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.22%

Year 3 Revenue Growth6.98%

Year 5 Revenue Growth5.70%

Year 7 Revenue Growth4.62%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin9.97%

Terminal EBIT Margin12.00%

Tax Rate21.61%

Historical Capex / Rev4.94%

Terminal Capex / Rev4.00%

NWC / Revenue7.30%

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: 20x EV/EBITDA (Consumer Cyclical 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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