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Westinghouse Air Brake Technologies Corporation (WAB) Intrinsic Value

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

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Westinghouse Air Brake Technologies Corporation (WAB)

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Intrinsic Value (DCF)

Current$228.52
→
Intrinsic$308.44
+35%
$203.46$308.44$507.62
Market implies 18% growth for 5 years
DCF analysis suggests WAB could have 35% upside at 25% growth — verify assumptions match your view.
At $229, the market prices in continued high-teens cash flow growth (18%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $203 → Bull $508. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →21%23%25%27%
8%$384$417$451$488
10%$263$285$308$334
12%$195$212$229$248
14%$153$166$180$194

Bull Case

  • Bull case ($508) offers 122% upside at 30% growth, 9% discount
  • 26% margin of safety vs. base case estimate
  • Market-implied growth (18%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($203) implies 11% downside at 20% growth, 12% discount
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$2.03B
Year 2$2.54B
Year 3$3.18B
Year 4$3.97B
Year 5$4.97B
Terminal$73.06B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.63BTTM 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 WAB stock undervalued or overvalued?
🟡 FAIRLY VALUED

WAB trades at $228.52, within 10% of our $251.99 intrinsic value estimate. At 10.0% WACC and 25.0% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $158.23 (bear) to $390.07 (bull).

What is WAB's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.63B, projected at 25.0% 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 $3.58B net debt and dividing by 0.17B shares: Bear $158.23 | Base $251.99 | Bull $390.07. Current price $228.52 implies +14% to base case.

How is WAB's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% 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=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($47.63B).

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: 29.3x.