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Graco Inc. (GGG) Intrinsic Value

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

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Graco Inc. (GGG)

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Intrinsic Value (DCF)

Current$87.55
→
Intrinsic$67.78
-23%
$47.45$67.78$106.42
Market implies 19% growth for 5 years
GGG trades at a premium to our conservative estimate — investors expect above-average performance.
At $88, the market prices in continued high-teens cash flow growth (19%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $47 → Bull $106. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →8%10%12%14%
8%$80$87$95$102
10%$58$63$68$73
12%$46$49$53$57
14%$38$41$44$47

Bull Case

  • Bull case ($106) offers 22% upside at 15% growth, 9% discount
  • Conservative 12% growth assumption is achievable based on track record

Bear Case

  • Bear case ($47) implies 46% downside at 10% growth, 12% discount
  • Price reflects 19% growth expectations vs 12% historical — high bar to clear
  • Trading 23% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$577.32M
Year 2$647.23M
Year 3$725.61M
Year 4$813.47M
Year 5$911.98M
Terminal$13.42B

📐 Model Inputs

Growth Rate12.1%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$514.96MTTM 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 GGG stock undervalued or overvalued?
🔴 OVERVALUED

GGG trades at $87.55 vs. our DCF-derived intrinsic value of $67.78, implying -20% downside. Using a 10.0% WACC and 12.1% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($94.56) suggests limited upside.

What is GGG's intrinsic value?

Using a 5-year DCF model: Base FCF of $515M, projected at 12.1% 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 $-627M net debt and dividing by 0.17B shares: Bear $48.47 | Base $67.78 | Bull $94.56. Current price $87.55 implies -20% to base case.

How is GGG's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 12.1% 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 ($11.06B).

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: 21.5x.