Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Norfolk Southern Corporation's cash flows over 10 years with analyst estimates for the first 3–5 years, fading toward long-term GDP growth for the remaining years with line-by-line expense modeling. Revenue is projected revenue growing from 2.5% to 2.9% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 32, DPO 51, DIO 11). At a 8.3% WACC with mid-year discounting, the terminal value (71% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.8x to Year 11 EBITDA. After subtracting net debt, the equity value implies a fair price of $329.70 per share, suggesting NSC is undervalued by 16.6% at the current price of $282.65.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | Terminal | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Profit Before Tax | 3,500 | 3,667 | 3,847 | 4,074 | 4,287 | 4,389 | 4,499 | 4,617 | 4,744 | 4,880 | 5,002 |
| (−) Net Interest | 757 | 793 | 832 | 881 | 927 | 949 | 973 | 998 | 1,026 | 1,055 | 1,082 |
| (+) D&A | 2,070 | 2,203 | 2,261 | 2,261 | 2,281 | 2,364 | 2,472 | 2,573 | 2,667 | 2,749 | 2,818 |
| EBITDA | 6,327 | 6,663 | 6,940 | 7,216 | 7,495 | 7,702 | 7,943 | 8,189 | 8,437 | 8,684 | 8,902 |
| (−) Tax | 752 | 788 | 827 | 875 | 921 | 943 | 967 | 992 | 1,019 | 1,049 | — |
| (−) CapEx | 2,135 | 2,237 | 2,347 | 2,485 | 2,615 | 2,677 | 2,744 | 2,816 | 2,893 | 2,977 | — |
| (−) ΔWC | 1,074 | 10 | 10 | 13 | 12 | 6 | 6 | 7 | 7 | 8 | — |
| Free Cash Flow (FCF) | 2,366 | 3,629 | 3,757 | 3,843 | 3,947 | 4,076 | 4,227 | 4,374 | 4,517 | 4,651 | — |
| Peers' EBITDA Multiple | 15.8x | ||||||||||
| Terminal Value | 140,644 | ||||||||||
| WACC / Discount Rate | 8.29% | ||||||||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5.5 | 6.5 | 7.5 | 8.5 | 9.5 | 5 |
| Present Value of FCF | 2,274 | 3,220 | 3,078 | 2,907 | 2,758 | 2,630 | 2,518 | 2,406 | 2,295 | 2,182 | 63,398 |
| Enterprise Value | 89,666 | ||||||||||
| Projection Period | 26,268 | 29.3% | |||||||||
| Terminal Value | 63,398 | 70.7% | |||||||||
| (−) Current Net Debt | 15,557 | ||||||||||
| Equity Value | 74,109 | ||||||||||
| (÷) Outstanding Shares | 225M | ||||||||||
| Fair Price | $330 | +16.6% | |||||||||
| WACC \ EV/EBITDA Exit Multiple | 11.8x | 13.8x | 15.8x | 17.8x | 19.8x |
|---|---|---|---|---|---|
| 6.3% | $313 | $356 | $399 | $442 | $485 |
| 7.3% | $284 | $323 | $362 | $402 | $441 |
| 8.3% | $258 | $294 | $330 | $365 | $401 |
| 9.3% | $235 | $267 | $300 | $333 | $365 |
| 10.3% | $213 | $243 | $273 | $303 | $332 |
Current price: $282.65. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 10-year projection period. Revenue is projected using analyst consensus estimates for the first 3–5 years, then gradually fading toward long-term GDP growth (~3%) for the remaining years. Expenses, D&A, and working capital follow the same line-by-line approach as the 5-year variant. The terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 11 EBITDA.
The longer 10-year horizon reduces the weight of the terminal value in the total enterprise value, making the model less sensitive to the exit multiple assumption. This approach combines the advantages of detailed FCFF modeling with a market-anchored exit, providing a more robust valuation for companies where long-term fundamentals are expected to converge toward industry norms. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.