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Alcon Inc. (ALC) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Alcon Inc. (ALC)

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Intrinsic Value (DCF)

Current$79.67
→
Intrinsic$93.01
+17%
$61.11$93.01$153.53
Market implies 21% growth for 5 years
ALC shows 17% potential upside using 25% growth — reasonable if fundamentals hold.
At $80, the market prices in continued strong cash flow growth (21%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $61 → Bull $154. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →21%23%25%27%
8%$116$126$136$148
10%$79$86$93$101
12%$59$64$69$75
14%$46$50$54$58

Bull Case

  • Bull case ($154) offers 93% upside at 30% growth, 9% discount
  • 14% margin of safety vs. base case estimate
  • Market-implied growth (21%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($61) implies 23% downside at 20% growth, 12% discount
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$1.76B
Year 2$2.20B
Year 3$2.75B
Year 4$3.44B
Year 5$4.29B
Terminal$63.18B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.41BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is ALC stock undervalued or overvalued?
🟡 FAIRLY VALUED

ALC trades at $79.67, within 10% of our $75.85 intrinsic value estimate. At 10.0% WACC and 25.0% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $47.37 (bear) to $117.81 (bull).

What is ALC's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.41B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $3.45B net debt and dividing by 0.50B shares: Bear $47.37 | Base $75.85 | Bull $117.81. Current price $79.67 implies -7% to base case.

How is ALC's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($41.19B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.