Vulcan Materials CompanyVMCNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $265.09 per share(market-calibrated)

-11.6%

Upside to Fair Value

Current

$300.00

Pure Model

$261.86

Fair Value

$265.09

Bull Case

$321.84

Bear Case

$207.99

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

3.74%

Calibrated Growth

2.47%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $261.86.

What's Driving This Ratingfor VMC

↓

CapEx normalizing toward maintenance

Historical CapEx is 8.11% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$469M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 29.69% 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 1.88% revenue growth, fading to 2.25% by Year 10. Revenue reaches $11.4B (vs $7.9B today).

🎯

Market pricing in higher long-term growth

To justify $300.00, the market implies 3.74% perpetual growth — 149bps above the model's 2.25%. 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 72.09% indicates efficient cash generation. FCF reaches $3.1B by Year 10 (26.86% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.05

Market Risk Premium4.50%

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

Cost of Equity (Re)9.25%

Cost of Debt

Pre-tax Cost of Debt4.34%

Tax Rate20.65%

After-tax Cost of Debt3.44%

Equity Weight (E/V)87.98%

Debt Weight (D/V)12.02%

WACC Calculation

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

WACC = (87.98% × 9.25%) + (12.02% × 3.44%)

= 8.55%

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	$8.1B	$9.2B	$10.2B	$10.7B	$11.4B
EBIT	$2.4B	$2.7B	$3.0B	$3.2B	$3.4B
Tax	$496M	$562M	$626M	$654M	$699M
NOPAT	$1.9B	$2.2B	$2.4B	$2.5B	$2.7B
+ Depreciation	$612M	$695M	$773M	$808M	$864M
- Capex	$656M	$660M	$641M	$573M	$456M
- Δ NWC	$18M	$67M	$27M	$28M	$30M
Free Cash Flow	$1.8B	$2.1B	$2.5B	$2.7B	$3.1B
Discount Factor	0.921	0.782	0.664	0.563	0.440
Present Value	$1.7B	$1.7B	$1.7B	$1.5B	$1.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.1B

Terminal Growth Rate2.25%

WACC8.55%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$49.7B

PV of Terminal Value$21.9B

Exit Multiple Method

Year 10 EBITDA$4.3B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$59.5B

PV of Terminal Value$26.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$15.7B

PV of Terminal Value$21.9B

Enterprise Value$37.6B

(-) Net Debt$5.2B

Equity Value$32.4B

Shares Outstanding132M

Price per Share$245.55

Exit Multiple Method

PV of Projected FCFs$15.7B

PV of Terminal Value$26.2B

Enterprise Value$41.9B

(-) Net Debt$5.2B

Equity Value$36.7B

Shares Outstanding132M

Price per Share$278.16

Pure Model Fair Value

$261.86

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
6.55%	$329.33	$342.22	$358.12	$378.20	$404.36
7.55%	$284.67	$292.93	$302.74	$314.60	$329.21
8.55%	$249.79	$255.38	$261.86	$269.45	$278.48
9.55%	$221.46	$225.41	$229.90	$235.05	$241.01
10.55%	$197.84	$200.71	$203.94	$207.57	$211.71

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

$207.99

-30.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.32

Base Case

$261.86

-12.7% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.05

Bull Case

$321.84

7.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.90

Key Assumptions & Drivers• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth1.88%

Year 3 Revenue Growth6.48%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin29.69%

Tax Rate20.65%

Historical Capex / Rev8.11%

Terminal Capex / Rev4.00%

NWC / Revenue12.09%

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: 14x EV/EBITDA (Basic Materials 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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