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GSK plc (GSK) Intrinsic Value

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

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GSK plc (GSK)

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Intrinsic Value (DCF)

Current$49.90
→
Intrinsic$27.37
-45%
$16.29$27.37$49.42
Market implies 21% growth for 5 years
Current price reflects execution expectations above 8% growth — not unreasonable for quality businesses.
At $50, the market prices in continued strong cash flow growth (21%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $16 → Bull $49. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →4%6%8%10%
8%$35$39$43$47
10%$22$25$27$30
12%$15$17$19$21
14%$11$13$14$16

Bull Case

  • Bull case ($49) with 10% growth, 8% discount rate
  • Conservative 8% growth assumption is achievable based on track record

Bear Case

  • Bear case ($16) implies 67% downside at 6% growth, 12% discount
  • Price reflects 21% growth expectations vs 8% historical — high bar to clear
  • Trading 45% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$3.86B
Year 2$4.17B
Year 3$4.50B
Year 4$4.86B
Year 5$5.25B
Terminal$83.17B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$3.57BTTM 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 GSK stock undervalued or overvalued?
🔴 OVERVALUED

GSK trades at $49.90 vs. our DCF-derived intrinsic value of $27.37, implying -46% downside. Using a 9.5% WACC and 8.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($40.84) suggests limited upside.

What is GSK's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.57B, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $13.29B net debt and dividing by 2.07B shares: Bear $17.63 | Base $27.37 | Bull $40.84. Current price $49.90 implies -46% to base case.

How is GSK's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% 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=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($69.97B).

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: 19.6x.