The Trade Desk, Inc.TTDNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $62.32 per share(market-calibrated)

+149.3%

Upside to Fair Value

Current

$24.99

Pure Model

$64.71

Fair Value

$62.32

Bull Case

$89.38

Bear Case

$45.50

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $64.71.

What's Driving This Ratingfor TTD

✓

CapEx already efficient

CapEx at 3.53% 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 37.16% 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 13.03% revenue growth in Year 1, fading to 11.95% by Year 5 and 3.75% by Year 10. Revenue reaches $7.6B by Year 10 (vs $2.9B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $43.07/share (18.0x terminal FCF) while exit multiple gives $86.36/share (46.4x 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 lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 60.39% indicates efficient cash generation. FCF reaches $1.8B by Year 10 (24.03% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.19

Market Risk Premium4.50%

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

Cost of Equity (Re)9.86%

Cost of Debt

Pre-tax Cost of Debt0.05%

Tax Rate30.00%

After-tax Cost of Debt0.03%

Equity Weight (E/V)96.49%

Debt Weight (D/V)3.51%

WACC Calculation

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

WACC = (96.49% × 9.86%) + (3.51% × 0.03%)

= 9.51%

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	$3.3B	$4.1B	$5.4B	$6.5B	$7.6B
EBIT	$1.2B	$1.5B	$2.0B	$2.4B	$2.8B
Tax	$365M	$452M	$601M	$721M	$843M
NOPAT	$852M	$1.1B	$1.4B	$1.7B	$2.0B
+ Depreciation	$86M	$107M	$142M	$170M	$199M
- Capex	$116M	$143M	$190M	$228M	$267M
- Δ NWC	$113M	$109M	$173M	$155M	$82M
Free Cash Flow	$709M	$909M	$1.2B	$1.5B	$1.8B
Discount Factor	0.913	0.761	0.635	0.529	0.403
Present Value	$647M	$692M	$750M	$777M	$733M

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 Rate3.75%

WACC9.51%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$32.7B

PV of Terminal Value$13.2B

Exit Multiple Method

Year 10 EBITDA$3.0B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$84.3B

PV of Terminal Value$34.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.3B

PV of Terminal Value$13.2B

Enterprise Value$20.5B

(-) Net Debt-$222M

Equity Value$20.7B

Shares Outstanding480M

Price per Share$43.07

Exit Multiple Method

PV of Projected FCFs$7.3B

PV of Terminal Value$34.0B

Enterprise Value$41.2B

(-) Net Debt-$222M

Equity Value$41.5B

Shares Outstanding480M

Price per Share$86.36

Pure Model Fair Value

$64.71

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%
7.51%	$79.62	$82.05	$85.13	$89.15	$94.64
8.51%	$70.10	$71.59	$73.41	$75.65	$78.48
9.51%	$62.57	$63.55	$64.71	$66.09	$67.76
10.51%	$56.37	$57.05	$57.83	$58.74	$59.81
11.51%	$51.13	$51.62	$52.17	$52.80	$53.52

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

$45.50

82.1% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.49

Base Case

$64.71

158.9% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.19

Bull Case

$89.38

257.6% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.01

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth13.03%

Year 3 Revenue Growth9.86%

Year 5 Revenue Growth11.95%

Year 7 Revenue Growth8.67%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin37.16%

Tax Rate30.00%

Historical Capex / Rev3.53%

NWC / Revenue30.00%

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: 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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