Stock Analysis on Net
Stock Analysis on Net

AbbVie Inc. (NYSE:ABBV)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

AbbVie Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 8.76%
01 FCFF0 19,743
1 FCFF1 18,358 = 19,743 × (1 + -7.02%) 16,880
2 FCFF2 17,597 = 18,358 × (1 + -4.15%) 14,877
3 FCFF3 17,371 = 17,597 × (1 + -1.28%) 13,504
4 FCFF4 17,647 = 17,371 × (1 + 1.59%) 12,614
5 FCFF5 18,433 = 17,647 × (1 + 4.46%) 12,115
5 Terminal value (TV5) 447,602 = 18,433 × (1 + 4.46%) ÷ (8.76% – 4.46%) 294,176
Intrinsic value of AbbVie Inc. capital 364,166
Less: Debt and finance lease obligations (fair value) 64,635
Intrinsic value of AbbVie Inc. common stock 299,531
 
Intrinsic value of AbbVie Inc. common stock (per share) $169.53
Current share price $234.76

Based on: 10-K (reporting date: 2025-12-31).

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Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

AbbVie Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 414,772 0.87 9.60%
Debt and finance lease obligations (fair value) 64,635 0.13 3.35% = 4.21% × (1 – 20.40%)

Based on: 10-K (reporting date: 2025-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,766,792,821 × $234.76
= $414,772,282,657.96

   Debt and finance lease obligations (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (35.80% + 21.00% + 22.00% + 12.10% + 11.10%) ÷ 5
= 20.40%

WACC = 8.76%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

AbbVie Inc., PRAT model

Microsoft Excel
Average Dec 31, 2025 Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
Selected Financial Data (US$ in millions)
Interest expense 2,893 2,808 2,224 2,230 2,423
Net earnings attributable to AbbVie Inc. 4,226 4,278 4,863 11,836 11,542
 
Effective income tax rate (EITR)1 35.80% 21.00% 22.00% 12.10% 11.10%
 
Interest expense, after tax2 1,857 2,218 1,735 1,960 2,154
Add: Dividends declared 11,819 11,178 10,647 10,179 9,470
Interest expense (after tax) and dividends 13,676 13,396 12,382 12,139 11,624
 
EBIT(1 – EITR)3 6,083 6,496 6,598 13,796 13,696
 
Short-term borrowings 2,499 — — 1 14
Current portion of long-term debt and finance lease obligations 6,056 6,804 7,191 4,135 12,481
Long-term debt and finance lease obligations, excluding current portion 58,941 60,340 52,194 59,135 64,189
Stockholders’ equity (deficit) (3,270) 3,325 10,360 17,254 15,408
Total capital 64,226 70,469 69,745 80,525 92,092
Financial Ratios
Retention rate (RR)4 -1.25 -1.06 -0.88 0.12 0.15
Return on invested capital (ROIC)5 9.47% 9.22% 9.46% 17.13% 14.87%
Averages
RR -0.58
ROIC 12.03%
 
FCFF growth rate (g)6 -7.02%

Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).

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2025 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 2,893 × (1 – 35.80%)
= 1,857

3 EBIT(1 – EITR) = Net earnings attributable to AbbVie Inc. + Interest expense, after tax
= 4,226 + 1,857
= 6,083

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [6,083 – 13,676] ÷ 6,083
= -1.25

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 6,083 ÷ 64,226
= 9.47%

6 g = RR × ROIC
= -0.58 × 12.03%
= -7.02%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (479,407 × 8.76% – 19,743) ÷ (479,407 + 19,743)
= 4.46%

where:

Total capital, fair value0 = current fair value of AbbVie Inc. debt and equity (US$ in millions)
FCFF0 = the last year AbbVie Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of AbbVie Inc. capital

FCFF growth rate (g) forecast

AbbVie Inc., H-model

Microsoft Excel
Year Value gt
1 g1 -7.02%
2 g2 -4.15%
3 g3 -1.28%
4 g4 1.59%
5 and thereafter g5 4.46%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -7.02% + (4.46% – -7.02%) × (2 – 1) ÷ (5 – 1)
= -4.15%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -7.02% + (4.46% – -7.02%) × (3 – 1) ÷ (5 – 1)
= -1.28%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -7.02% + (4.46% – -7.02%) × (4 – 1) ÷ (5 – 1)
= 1.59%