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Ralph Lauren Corporation (RL) Intrinsic Value

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

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Ralph Lauren Corporation (RL)

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Intrinsic Value (DCF)

Current$369.15
→
Intrinsic$427.38
+16%
$287.61$427.38$692.78
Market implies 15% growth for 5 years
RL shows 16% potential upside using 18% growth — reasonable if fundamentals hold.
At $369, the market prices in continued high-teens cash flow growth (15%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $288 → Bull $693. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →14%16%18%20%
8%$522$567$615$666
10%$364$395$427$462
12%$276$299$324$350
14%$221$239$258$279

Bull Case

  • Bull case ($693) offers 88% upside at 22% growth, 9% discount
  • 14% margin of safety vs. base case estimate
  • Market-implied growth (15%) ≤ historical CAGR (18%)

Bear Case

  • Bear case ($288) implies 22% downside at 15% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$1.21B
Year 2$1.43B
Year 3$1.69B
Year 4$2.01B
Year 5$2.38B
Terminal$34.95B

📐 Model Inputs

Growth Rate18.4%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.02BTTM 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 RL stock undervalued or overvalued?
🟢 UNDERVALUED

RL trades at $369.15 vs. our DCF-derived intrinsic value of $427.38, implying +18% upside. At a 10.0% WACC and 18.4% projected FCF growth, the market appears to be underpricing the present value of RL's future cash flows. The bear case ($279.78) still suggests upside, providing margin of safety.

What is RL's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.02B, projected at 18.4% 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 $746M net debt and dividing by 0.06B shares: Bear $279.78 | Base $427.38 | Bull $642.36. Current price $369.15 implies +18% to base case.

How is RL's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 18.4% 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 ($28.10B).

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: 27.6x.