Zebra Technologies CorporationZBRANASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $415.26 per share(market-calibrated)

+84.2%

Upside to Fair Value

Current

$225.38

Pure Model

$428.88

Fair Value

$415.26

Bull Case

$561.29

Bear Case

$311.94

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

1.22%

Calibrated Growth

2.86%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $428.88.

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 $288.71/share (16.5x terminal FCF) while exit multiple gives $569.05/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 1.22% perpetual growth — 253bps 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)80.27%

Debt Weight (D/V)19.73%

WACC Calculation

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

WACC = (80.27% × 11.95%) + (19.73% × 2.31%)

= 10.05%

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	$6.6B	$7.4B	$8.0B	$8.9B
EBIT	$917M	$1.0B	$1.3B	$1.6B	$2.0B
Tax	$231M	$256M	$322M	$403M	$505M
NOPAT	$686M	$760M	$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	$887M	$1.1B	$1.4B	$1.7B
Discount Factor	0.909	0.750	0.620	0.512	0.384
Present Value	$718M	$665M	$683M	$692M	$642M

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%

WACC10.05%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$27.6B

PV of Terminal Value$10.6B

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$24.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.8B

PV of Terminal Value$10.6B

Enterprise Value$17.4B

(-) Net Debt$2.7B

Equity Value$14.7B

Shares Outstanding51M

Price per Share$288.71

Exit Multiple Method

PV of Projected FCFs$6.8B

PV of Terminal Value$24.8B

Enterprise Value$31.6B

(-) Net Debt$2.7B

Equity Value$28.9B

Shares Outstanding51M

Price per Share$569.05

Pure Model Fair Value

$428.88

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%
8.05%	$535.40	$551.53	$571.40	$596.51	$629.23
9.05%	$467.93	$478.27	$490.55	$505.39	$523.69
10.05%	$413.76	$420.76	$428.88	$438.40	$449.71
11.05%	$368.77	$373.72	$379.35	$385.81	$393.29
12.05%	$330.54	$334.15	$338.20	$342.77	$347.96

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

$311.94

38.4% vs current

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

Base Case

$428.88

90.3% vs current

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

Bull Case

$561.29

149.0% 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 Growth5.17%

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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