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UL Solutions Inc. (ULS) Intrinsic Value

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

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UL Solutions Inc. (ULS)

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Intrinsic Value (DCF)

Current$77.13
→
Intrinsic$28.73
-63%
$18.61$28.73$47.96
Current price reflects execution expectations above 13% growth — not unreasonable for quality businesses.
Range: Bear $19 → Bull $48. 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: $48).
Discount ↓Growth →9%11%13%15%
8%$35$38$42$46
10%$24$26$29$31
12%$18$19$21$23
14%$14$15$17$18

Bull Case

  • Bull case ($48) with 16% growth, 9% discount rate
  • Conservative 13% growth assumption is achievable based on track record

Bear Case

  • Bear case ($19) implies 76% downside at 10% growth, 12% discount
  • Trading 63% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($48) — requires exceptional execution
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5-Year Free Cash Flow Projection

Year 1$324.57M
Year 2$367.07M
Year 3$415.12M
Year 4$469.47M
Year 5$530.94M
Terminal$7.81B

📐 Model Inputs

Growth Rate13.1%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$287.00MTTM 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 ULS stock undervalued or overvalued?
🔴 OVERVALUED

ULS trades at $77.13 vs. our DCF-derived intrinsic value of $28.73, implying -66% downside. Using a 10.0% WACC and 13.1% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($42.41) suggests limited upside.

What is ULS's intrinsic value?

Using a 5-year DCF model: Base FCF of $287M, projected at 13.1% 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 $637M net debt and dividing by 0.20B shares: Bear $18.94 | Base $28.73 | Bull $42.41. Current price $77.13 implies -66% to base case.

How is ULS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 13.1% 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 ($6.41B).

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: 22.3x.