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Royalty Pharma plc (RPRX) Intrinsic Value

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

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Royalty Pharma plc (RPRX)

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Intrinsic Value (DCF)

Current$39.72
→
Intrinsic$83.23
+110%
$53.32$83.23$140.08
Market implies 1% growth for 5 years
DCF analysis suggests RPRX could have 110% upside at 11% growth — verify assumptions match your view.
At $40, the market prices in only 1% growth — below historical 11%, suggesting low expectations.
Range: Bear $53 → Bull $140. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →7%9%11%13%
8%$102$112$122$134
10%$69$76$83$91
12%$51$56$62$67
14%$39$43$48$52

Bull Case

  • Bull case ($140) offers 253% upside at 13% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (1%) ≤ historical CAGR (11%)

Bear Case

  • Bear case ($53) with 9% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$3.06B
Year 2$3.39B
Year 3$3.75B
Year 4$4.16B
Year 5$4.60B
Terminal$67.67B

📐 Model Inputs

Growth Rate10.7%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.77BTTM 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 RPRX stock undervalued or overvalued?
🟢 UNDERVALUED

RPRX trades at $39.72 vs. our DCF-derived intrinsic value of $83.23, implying +105% upside. At a 10.0% WACC and 10.7% projected FCF growth, the market appears to be underpricing the present value of RPRX's future cash flows. The bear case ($55.59) still suggests upside, providing margin of safety.

What is RPRX's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.77B, projected at 10.7% 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 $6.68B net debt and dividing by 0.59B shares: Bear $55.59 | Base $83.23 | Bull $121.08. Current price $39.72 implies +105% to base case.

How is RPRX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 10.7% 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 ($56.12B).

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: 20.3x.