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Armstrong World Industries, Inc. (AWI) Intrinsic Value

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

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Armstrong World Industries, Inc. (AWI)

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Intrinsic Value (DCF)

Current$196.50
→
Intrinsic$72.50
-63%
$45.81$72.50$123.24
Market implies 35% growth for 5 years
Current price reflects execution expectations above 11% growth — not unreasonable for quality businesses.
At $197, the market prices in continued strong cash flow growth (35%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $46 → Bull $123. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →7%9%11%13%
8%$89$98$107$118
10%$60$66$73$80
12%$44$48$53$58
14%$33$37$41$45

Bull Case

  • Bull case ($123) with 13% growth, 9% discount rate
  • Conservative 11% growth assumption is achievable based on track record

Bear Case

  • Bear case ($46) implies 77% downside at 8% growth, 12% discount
  • Price reflects 35% growth expectations vs 11% historical — high bar to clear
  • Trading 63% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$203.43M
Year 2$224.90M
Year 3$248.64M
Year 4$274.89M
Year 5$303.91M
Terminal$4.47B

📐 Model Inputs

Growth Rate10.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$184.00MTTM 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 AWI stock undervalued or overvalued?
🔴 OVERVALUED

AWI trades at $196.50 vs. our DCF-derived intrinsic value of $72.50, implying -63% downside. Using a 10.0% WACC and 10.6% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($106.17) suggests limited upside.

What is AWI's intrinsic value?

Using a 5-year DCF model: Base FCF of $184M, projected at 10.6% 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 $521M net debt and dividing by 0.04B shares: Bear $47.90 | Base $72.50 | Bull $106.17. Current price $196.50 implies -63% to base case.

How is AWI's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 10.6% 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 ($3.71B).

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: 20.2x.