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Howmet Aerospace Inc. (HWM) Intrinsic Value

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

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Howmet Aerospace Inc. (HWM)

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Intrinsic Value (DCF)

Current$224.26
→
Intrinsic$75.87
-66%
$48.41$75.87$130.44
Current price reflects execution expectations above 22% growth — not unreasonable for quality businesses.
Range: Bear $48 → Bull $130. 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: $130).
Discount ↓Growth →18%20%22%24%
8%$98$106$115$125
10%$64$70$76$82
12%$46$51$55$60
14%$35$39$42$46

Bull Case

  • Bull case ($130) with 27% growth, 8% discount rate

Bear Case

  • Bear case ($48) implies 78% downside at 18% growth, 12% discount
  • Trading 66% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($130) — requires exceptional execution
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5-Year Free Cash Flow Projection

Year 1$1.20B
Year 2$1.47B
Year 3$1.79B
Year 4$2.20B
Year 5$2.69B
Terminal$42.65B

📐 Model Inputs

Growth Rate22.5%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$977.00MTTM 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 HWM stock undervalued or overvalued?
🔴 OVERVALUED

HWM trades at $224.26 vs. our DCF-derived intrinsic value of $68.41, implying -68% downside. Using a 9.5% WACC and 22.5% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($109.23) suggests limited upside.

What is HWM's intrinsic value?

Using a 5-year DCF model: Base FCF of $977M, projected at 22.5% 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 $2.91B net debt and dividing by 0.41B shares: Bear $41.54 | Base $68.41 | Bull $109.23. Current price $224.26 implies -68% to base case.

How is HWM's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 22.5% 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 ($30.95B).

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: 31.7x.