Viatris Inc.VTRSNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $87.01 per share(market-calibrated)

+477.6%

Upside to Fair Value

Current

$15.07

Pure Model

$98.89

Fair Value

$87.01

Bull Case

$127.82

Bear Case

$78.00

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $98.89.

What's Driving This Ratingfor VTRS

✓

CapEx already efficient

CapEx at 3.05% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 0.60% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.7B (14.91% margin).

→

Moderate revenue growth

Analyst consensus projects 1.76% revenue growth, fading to 3.00% by Year 10. Revenue reaches $17.9B (vs $14.3B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 81.42% indicates efficient cash generation. FCF reaches $5.4B by Year 10 (30.11% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.80

Market Risk Premium4.50%

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

Cost of Equity (Re)8.08%

Cost of Debt

Pre-tax Cost of Debt3.84%

Tax Rate21.00%

After-tax Cost of Debt3.03%

Equity Weight (E/V)54.54%

Debt Weight (D/V)45.46%

WACC Calculation

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

WACC = (54.54% × 8.08%) + (45.46% × 3.03%)

= 5.79%

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	$14.6B	$15.4B	$15.4B	$16.4B	$17.9B
EBIT	$87M	$92M	$690M	$1.6B	$2.7B
Tax	$18M	$19M	$145M	$346M	$560M
NOPAT	$69M	$72M	$545M	$1.3B	$2.1B
+ Depreciation	$3.2B	$3.4B	$3.4B	$3.6B	$3.9B
- Capex	$443M	$468M	$470M	$498M	$545M
- Δ NWC	$60M	$132M	$107M	$114M	$124M
Free Cash Flow	$2.8B	$2.9B	$3.4B	$4.3B	$5.4B
Discount Factor	0.945	0.845	0.755	0.674	0.570
Present Value	$2.6B	$2.4B	$2.5B	$2.9B	$3.1B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.4B

Terminal Growth Rate3.00%

WACC5.79%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$198.9B

PV of Terminal Value$113.3B

Exit Multiple Method

Year 10 EBITDA$6.6B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$158.7B

PV of Terminal Value$90.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$27.3B

PV of Terminal Value$113.3B

Enterprise Value$140.6B

(-) Net Debt$13.4B

Equity Value$127.2B

Shares Outstanding1.2B

Price per Share$108.69

Exit Multiple Method

PV of Projected FCFs$27.3B

PV of Terminal Value$90.4B

Enterprise Value$117.7B

(-) Net Debt$13.4B

Equity Value$104.3B

Shares Outstanding1.2B

Price per Share$89.10

Pure Model Fair Value

$98.89

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%
3.79%	$139.29	$133.09	$127.19	$121.57	$116.21
4.79%	$108.36	$120.20	$127.19	$121.57	$116.21
5.79%	$85.77	$91.33	$98.89	$109.76	$116.21
6.79%	$71.21	$74.31	$78.23	$83.35	$90.29
7.79%	$60.70	$62.61	$64.92	$67.78	$71.38

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

$78.00

417.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.00

Base Case

$98.89

556.4% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.80

Bull Case

$127.82

748.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.68

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth1.76%

Year 3 Revenue Growth3.73%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin0.60%

Terminal EBIT Margin20.00%

Tax Rate21.00%

Historical Capex / Rev3.05%

NWC / Revenue23.88%

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: 24x EV/EBITDA (Healthcare 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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