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United Parcel Service, Inc. (UPS) Intrinsic Value

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

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United Parcel Service, Inc. (UPS)

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Intrinsic Value (DCF)

Current$108.62
→
Intrinsic$207.14
+91%
$131.09$207.14$358.31
Market implies 6% growth for 5 years
DCF analysis suggests UPS could have 91% upside at 20% growth — verify assumptions match your view.
At $109, the market prices in only 6% growth — below historical 20%, suggesting low expectations.
Range: Bear $131 → Bull $358. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →16%18%20%22%
8%$266$290$316$344
10%$174$190$207$225
12%$125$137$150$163
14%$95$104$114$125

Bull Case

  • Bull case ($358) offers 230% upside at 24% growth, 8% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (6%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($131) with 16% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$7.46B
Year 2$8.95B
Year 3$10.74B
Year 4$12.88B
Year 5$15.46B
Terminal$244.98B

📐 Model Inputs

Growth Rate20.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$6.21BTTM 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 UPS stock undervalued or overvalued?
🟢 UNDERVALUED

UPS trades at $108.62 vs. our DCF-derived intrinsic value of $207.14, implying +97% upside. At a 9.5% WACC and 20.0% projected FCF growth, the market appears to be underpricing the present value of UPS's future cash flows. The bear case ($125.29) still suggests upside, providing margin of safety.

What is UPS's intrinsic value?

Using a 5-year DCF model: Base FCF of $6.21B, projected at 20.0% 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 $19.54B net debt and dividing by 0.86B shares: Bear $125.29 | Base $207.14 | Bull $331.48. Current price $108.62 implies +97% to base case.

How is UPS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 20.0% 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 ($196.85B).

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.