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ESCO Technologies Inc. (ESE) Intrinsic Value

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

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ESCO Technologies Inc. (ESE)

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Intrinsic Value (DCF)

Current$214.17
→
Intrinsic$214.89
+0%
$143.47$214.89$350.40
Market implies 25% growth for 5 years
ESE appears fairly valued — current price aligns with our DCF estimate.
At $214, the market prices in continued strong cash flow growth (25%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $143 → Bull $350. Current price implies expectations near the base case.
Discount ↓Growth →21%23%25%27%
8%$266$289$312$337
10%$184$199$215$232
12%$138$149$161$174
14%$109$118$127$137

Bull Case

  • Bull case ($350) offers 64% upside at 30% growth, 9% discount
  • 0% margin of safety vs. base case estimate
  • Market-implied growth (25%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($143) implies 33% 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$205.09M
Year 2$256.37M
Year 3$320.46M
Year 4$400.57M
Year 5$500.71M
Terminal$7.37B

📐 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$164.07MTTM 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 ESE stock undervalued or overvalued?
🟡 FAIRLY VALUED

ESE trades at $214.17, within 10% of our $176.49 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 $112.70 (bear) to $270.43 (bull).

What is ESE's intrinsic value?

Using a 5-year DCF model: Base FCF of $164M, 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 $230M net debt and dividing by 0.03B shares: Bear $112.70 | Base $176.49 | Bull $270.43. Current price $214.17 implies -15% to base case.

How is ESE'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 ($4.80B).

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.