Zurn Elkay Water Solutions Corporation (ZWS) Intrinsic Value

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

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Zurn Elkay Water Solutions Corporation (ZWS)

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Intrinsic Value (DCF)

Current$47.27
Intrinsic$38.76
-18%
$25.79$38.76$63.40
Market implies 22% growth for 5 years
ZWS trades at a premium to our conservative estimate — investors expect above-average performance.
At $47, the market prices in continued strong cash flow growth (22%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $26 → Bull $63. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →13%15%17%19%
8%$47$52$56$61
10%$33$36$39$42
12%$25$27$29$32
14%$20$21$23$25

Bull Case

  • Bull case ($63) offers 34% upside at 21% growth, 9% discount

Bear Case

  • Bear case ($26) implies 45% downside at 14% growth, 12% discount
  • Price reflects 22% growth expectations vs 17% historical — high bar to clear
  • Trading 18% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$318.28M
Year 2$372.85M
Year 3$436.77M
Year 4$511.66M
Year 5$599.38M
Terminal$8.82B

📐 Model Inputs

Growth Rate17.1%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$271.70MTTM 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.

Frequently Asked Questions

Is ZWS stock undervalued or overvalued?
🔴 OVERVALUED

ZWS trades at $47.27 vs. our DCF-derived intrinsic value of $38.76, implying -16% downside. Using a 10.0% WACC and 17.1% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($58.14) suggests limited upside.

What is ZWS's intrinsic value?

Using a 5-year DCF model: Base FCF of $272M, projected at 17.1% 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 $354M net debt and dividing by 0.17B shares: Bear $25.33 | Base $38.76 | Bull $58.14. Current price $47.27 implies -16% to base case.

How is ZWS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 17.1% 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 ($7.12B).

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: 26.2x.