Zebra Technologies CorporationZBRANASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $415.21 per share(market-calibrated)

+79.4%

Upside to Fair Value

Current

$231.42

Pure Model

$426.71

Fair Value

$415.21

Bull Case

$558.37

Bear Case

$310.28

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

1.62%

Calibrated Growth

3.00%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $426.71.

What's Driving This Ratingfor ZBRA

✓

CapEx already efficient

CapEx at 1.36% 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 15.29% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.0B (22.45% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 11.23% revenue growth in Year 1, fading to 3.75% by Year 5 and 3.75% by Year 10. Revenue reaches $8.9B by Year 10 (vs $5.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $286.40/share (16.4x terminal FCF) while exit multiple gives $567.02/share (38.6x 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 1.62% perpetual growth — 213bps 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 72.45% indicates efficient cash generation. FCF reaches $1.7B by Year 10 (18.75% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.66

Market Risk Premium4.50%

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

Cost of Equity (Re)11.95%

Cost of Debt

Pre-tax Cost of Debt3.09%

Tax Rate25.18%

After-tax Cost of Debt2.31%

Equity Weight (E/V)80.68%

Debt Weight (D/V)19.32%

WACC Calculation

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

WACC = (80.68% × 11.95%) + (19.32% × 2.31%)

= 10.09%

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	$6.0B	$6.7B	$7.4B	$8.0B	$8.9B
EBIT	$917M	$1.0B	$1.3B	$1.6B	$2.0B
Tax	$231M	$256M	$322M	$403M	$505M
NOPAT	$686M	$761M	$957M	$1.2B	$1.5B
+ Depreciation	$206M	$228M	$254M	$274M	$306M
- Capex	$81M	$90M	$101M	$108M	$121M
- Δ NWC	$20M	$11M	$9M	$10M	$11M
Free Cash Flow	$790M	$888M	$1.1B	$1.4B	$1.7B
Discount Factor	0.908	0.749	0.618	0.510	0.382
Present Value	$718M	$665M	$681M	$691M	$640M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.7B

Terminal Growth Rate3.75%

WACC10.09%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$27.4B

PV of Terminal Value$10.5B

Exit Multiple Method

Year 10 EBITDA$2.3B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$64.7B

PV of Terminal Value$24.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.8B

PV of Terminal Value$10.5B

Enterprise Value$17.2B

(-) Net Debt$2.7B

Equity Value$14.6B

Shares Outstanding51M

Price per Share$286.40

Exit Multiple Method

PV of Projected FCFs$6.8B

PV of Terminal Value$24.7B

Enterprise Value$31.5B

(-) Net Debt$2.7B

Equity Value$28.8B

Shares Outstanding51M

Price per Share$567.02

Pure Model Fair Value

$426.71

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%
8.09%	$532.38	$548.20	$567.66	$592.20	$624.08
9.09%	$465.56	$475.72	$487.79	$502.35	$520.27
10.09%	$411.81	$418.72	$426.71	$436.07	$447.19
11.09%	$367.13	$372.02	$377.57	$383.94	$391.31
12.09%	$329.14	$332.71	$336.71	$341.22	$346.34

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

$310.28

34.1% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.07

Base Case

$426.71

84.4% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.66

Bull Case

$558.37

141.3% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.41

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth11.23%

Year 3 Revenue Growth5.25%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin15.29%

Terminal EBIT Margin25.00%

Tax Rate25.18%

Historical Capex / Rev1.36%

NWC / Revenue3.32%

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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