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Armstrong World Industries, Inc.

Intrinsic Value Analysis (Discounted Cash Flow)Industry: ConstructionSector: Industrials

Fair Value Summary

Current Price$184.66
5Y Range75.60 – 116.78
5Y Selected96.19
(-) Safety Margin82.26%
5Y Buy Price$17.06
Upside (to Buy Price)-90.76%
10Y Range86.72 – 130.48
10Y Selected108.60
(-) Safety Margin82.26%
10Y Buy Price$19.27
Upside (to Buy Price)-89.57%

Company Predictability & Safety

MetricValue
Revenue R2 (5Y)0.9803
Revenue R2 (10Y)0.4451
Net Income R2 (5Y)0.7065
Net Income R2 (10Y)0.1609
EBITDA R2 (5Y)0.7345
EBITDA R2 (10Y)0.2361
FCF R2 (5Y)0.1496
FCF R2 (10Y)0.5869
Safety Score0.1774

DA 10-Year Projection

Metric2025202620272028202920302031203220332034
% Growth9.63%9.00%8.38%7.75%7.13%6.50%5.88%5.25%4.63%4.00%
Revenue1,584.891,727.581,872.312,017.452,161.232,301.742,436.992,564.952,683.592,790.93
EBITDA423.31461.42500.08538.84577.25614.78650.90685.08716.76745.43
D&A-130.51-142.26-154.18-166.13-177.97-189.54-200.68-211.21-220.98-229.82
EBIT292.80319.16345.90372.72399.28425.24450.22473.86495.78515.61
Pro forma Taxes-64.80-70.63-76.55-82.49-88.36-94.11-99.64-104.87-109.72-114.11
NOPAT228.00248.53269.35290.23310.91331.13350.58368.99386.06401.50
Capital Expenditures-127.57-139.05-150.70-162.38-173.96-185.27-196.15-206.45-216.00-224.64
NWC Investment-6.54-6.71-6.80-6.82-6.76-6.61-6.36-6.02-5.58-5.05
(+) D&A130.51142.26154.18166.13177.97189.54200.68211.21220.98229.82
Free Cash Flow224.40245.03266.02287.15308.17328.79348.75367.74385.46401.64
Diluted Shares Outstanding43,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.0043,775,000.00

Discounting Periods

MetricDec-25Dec-26Dec-27Dec-28Dec-29Dec-30Dec-31Dec-32Dec-33Dec-34
Period Start9/30/251/1/261/1/271/1/281/1/291/1/301/1/311/1/321/1/331/1/34
Period End12/31/2512/31/2612/31/2712/31/2812/31/2912/31/3012/31/3112/31/3212/31/3312/31/34
Mid-Point11/15/257/2/267/2/277/1/287/2/297/2/307/2/317/1/327/2/337/2/34
Time (t)0.100.461.462.463.464.465.466.467.468.46
Valuation Date1/16/26

Base Case Projected Flows

WACC: 9.10%Terminal Growth: 2.22%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.880.810.740.680.620.570.520.48
PV UFCF222.46235.41234.26231.78228.00222.98216.79209.53201.31192.27
Raw: 4,581.74
3,245.46
Raw: 5,971.44
2,736.78

Base Case Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value4,397.374,931.57
(-) Net Debt383.30383.30
Equity Value4,014.074,548.27
(/) Shares Out43.7843.78
Fair Value$91.70$103.90
(-) Safety Margin82.26%82.26%
Buy Price$16.27$18.43
Current Price$184.66$184.66
Upside (to Buy Price)-91.19%-90.02%

Conservative Projected Flows

WACC: 10.10%Terminal Growth: 1.72%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.870.790.720.650.590.540.490.44
PV UFCF222.25234.42231.16226.64220.92214.09206.25197.53188.07177.98
Raw: 3,742.78
2,557.10
Raw: 4,878.01
2,060.15

Conservative Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value3,692.494,179.46
(-) Net Debt383.30383.30
Equity Value3,309.193,796.16
(/) Shares Out43.7843.78
Fair Value$75.60$86.72
(-) Safety Margin82.26%82.26%
Buy Price$13.41$15.38
Current Price$184.66$184.66
Upside (to Buy Price)-92.74%-91.67%

Aggressive Projected Flows

WACC: 8.10%Terminal Growth: 2.72%
Metric2025202620272028202920302031203220332034TV (5y)TV (10y)
Discount Factor0.990.960.890.830.760.710.650.600.560.52
PV UFCF222.66236.41237.43237.09235.38232.33227.97222.37215.63207.84
Raw: 5,888.92
4,326.31
Raw: 7,675.10
3,820.13

Aggressive Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value5,495.296,095.24
(-) Net Debt383.30383.30
Equity Value5,111.995,711.94
(/) Shares Out43.7843.78
Fair Value$116.78$130.48
(-) Safety Margin82.26%82.26%
Buy Price$20.72$23.15
Current Price$184.66$184.66
Upside (to Buy Price)-88.78%-87.46%

Reverse DCF: Market Implied Growth

Current Price$184.66
WACC Used9.1%
IMPLIED REVENUE GROWTH145.34%
Metric2027202820292030203120322033203420352036
Implied Revenue3,925.889,631.6423,629.9657,973.01142,229.20348,940.72856,080.402,100,281.235,152,765.1712,641,635.05
Constant Implied Growth145.34%145.34%145.34%145.34%145.34%145.34%145.34%145.34%145.34%145.34%
Implied Free Cash Flow0.390.962.365.8014.2234.8985.61210.03515.281,264.16
Discount Factor0.930.810.740.680.620.570.520.480.440.40
Present Value of Implied FCF0.370.781.753.938.8419.8844.71100.54226.10508.44

Rolling Historical DCF (Backtest)

Valuation based on actual realized growth.
YearValuation DateActual PriceRealized Growth (5Y)Calculated Fair ValueValuation Delta
20192019-12-31$93.9712.71%$46.75-50.25%
20182018-12-31$58.219.23%$47.64-18.16%
20172017-12-31$60.557.61%$18.70-69.11%
20162016-12-31$41.806.82%$-33.25-179.55%
20152015-12-31$39.637.59%$-1.24-103.12%
20142014-12-31$44.301.57%$-19.72-144.52%
20132013-12-31$49.93-20.29%$-16.11-132.27%
20122012-12-31$43.96-30.24%$-11.24-125.56%
20112011-12-31$38.02-28.43%$-2.23-105.86%
20102010-12-31$37.27-14.69%$3.15-91.54%
20092009-12-31$33.74-0.62%$41.6823.54%
20082008-12-31$18.74-2.49%$25.9238.34%
20072007-12-31$34.76-6.51%$94.49171.82%
20062006-12-31$36.74-8.89%$-4.82-113.12%
20052005-12-31$34.67-8.85%$16.62-52.06%
20042004-12-31$34.67-12.05%$13.41-61.31%
20032003-12-31$34.67-10.49%$30.56-11.86%
20022002-12-31$34.67-8.05%$33.26-4.08%
20012001-12-31$34.67-2.58%$52.7652.17%
20002000-12-31$34.674.05%$-51.90-249.69%
19991999-12-31$34.671.70%$23.37-32.59%
19981998-12-31$34.670.17%$-16.77-148.37%
19971997-12-31$34.671.87%$85.05145.31%
19961996-12-31$34.678.94%$-8.35-124.10%
19951995-12-31$34.6713.24%$51.4248.32%

Monte Carlo Simulation (1,000 Iterations)

Mean Fair Value
$106.16
Median
$103.00
10th Percentile
$86.04
90th Percentile
$129.08

Fair Value Distribution

$70.38 - $79.50
22
$79.50 - $88.61
124
$88.61 - $97.72
218
$97.72 - $106.84
218
$106.84 - $115.95
186
$115.95 - $125.06
94
$125.06 - $134.18
68
$134.18 - $143.29
27
$143.29 - $152.41
19
$152.41 - $161.52
9
$161.52 - $170.63
8
$170.63 - $179.75
5
$179.75 - $188.86
0
$188.86 - $197.97
0
$197.97 - $207.09
0
$207.09 - $216.20
0
$216.20 - $225.32
0
$225.32 - $234.43
0
$234.43 - $243.54
0
$243.54 - $252.66
2