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Leonardo DRS, Inc. (DRS) Intrinsic Value

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

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Leonardo DRS, Inc. (DRS)

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Intrinsic Value (DCF)

Current$42.26
→
Intrinsic$15.84
-63%
$10.98$15.84$25.08
Current price reflects execution expectations above 13% growth — not unreasonable for quality businesses.
Range: Bear $11 → Bull $25. Current price implies expectations above the base case, closer to bull expectations.
Current price reflects assumptions at the upper end of our valuation range (bull case: $25).
Discount ↓Growth →9%11%13%15%
8%$19$21$22$24
10%$14$15$16$17
12%$11$11$12$13
14%$9$9$10$11

Bull Case

  • Bull case ($25) with 15% growth, 9% discount rate
  • Conservative 13% growth assumption is achievable based on track record

Bear Case

  • Bear case ($11) implies 74% downside at 10% growth, 12% discount
  • Trading 63% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($25) — requires exceptional execution
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5-Year Free Cash Flow Projection

Year 1$209.75M
Year 2$236.53M
Year 3$266.72M
Year 4$300.78M
Year 5$339.18M
Terminal$4.99B

📐 Model Inputs

Growth Rate12.8%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$186.00MTTM 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 DRS stock undervalued or overvalued?
🔴 OVERVALUED

DRS trades at $42.26 vs. our DCF-derived intrinsic value of $15.84, implying -58% downside. Using a 10.0% WACC and 12.8% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($22.36) suggests limited upside.

What is DRS's intrinsic value?

Using a 5-year DCF model: Base FCF of $186M, projected at 12.8% 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 $-140M net debt and dividing by 0.27B shares: Bear $11.17 | Base $15.84 | Bull $22.36. Current price $42.26 implies -58% to base case.

How is DRS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 12.8% 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 ($4.10B).

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: 22.1x.