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Abbott Laboratories (NYSE:ABT)

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)

Abbott Laboratories, 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 13.73%
01 FCFF0 7,815
1 FCFF1 8,349 = 7,815 × (1 + 6.83%) 7,341
2 FCFF2 8,976 = 8,349 × (1 + 7.51%) 6,939
3 FCFF3 9,711 = 8,976 × (1 + 8.19%) 6,601
4 FCFF4 10,573 = 9,711 × (1 + 8.88%) 6,320
5 FCFF5 11,584 = 10,573 × (1 + 9.56%) 6,088
5 Terminal value (TV5) 304,265 = 11,584 × (1 + 9.56%) ÷ (13.73% – 9.56%) 159,906
Intrinsic value of Abbott Laboratories capital 193,195
Less: Long-term debt, including current maturities (fair value) 12,772
Intrinsic value of Abbott Laboratories common stock 180,423
 
Intrinsic value of Abbott Laboratories common stock (per share) $104.27
Current share price $111.25

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

1 See details »

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)

Abbott Laboratories, cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 192,505 0.94 14.43%
Long-term debt, including current maturities (fair value) 12,772 0.06 3.15% = 3.83% × (1 – 17.68%)

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
= 1,730,383,296 × $111.25
= $192,505,141,680.00

   Long-term debt, including current maturities (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
= (22.90% + 21.00% + 14.10% + 16.50% + 13.90%) ÷ 5
= 17.68%

WACC = 13.73%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Abbott Laboratories, 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 493 559 637 558 533
Net earnings 6,524 13,402 5,723 6,933 7,071
 
Effective income tax rate (EITR)1 22.90% 21.00% 14.10% 16.50% 13.90%
 
Interest expense, after tax2 380 442 547 466 459
Add: Cash dividends declared on common shares 4,189 3,904 3,625 3,365 3,235
Interest expense (after tax) and dividends 4,569 4,346 4,172 3,831 3,694
 
EBIT(1 – EITR)3 6,904 13,844 6,270 7,399 7,530
 
Current portion of long-term debt 3,033 1,500 1,080 2,251 754
Long-term debt, excluding current portion 9,896 12,625 13,599 14,522 17,296
Total Abbott shareholders’ investment 52,130 47,664 38,603 36,686 35,802
Total capital 65,059 61,789 53,282 53,459 53,852
Financial Ratios
Retention rate (RR)4 0.34 0.69 0.33 0.48 0.51
Return on invested capital (ROIC)5 10.61% 22.40% 11.77% 13.84% 13.98%
Averages
RR 0.47
ROIC 14.52%
 
FCFF growth rate (g)6 6.83%

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).

1 See details »

2025 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 493 × (1 – 22.90%)
= 380

3 EBIT(1 – EITR) = Net earnings + Interest expense, after tax
= 6,524 + 380
= 6,904

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [6,904 – 4,569] ÷ 6,904
= 0.34

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 6,904 ÷ 65,059
= 10.61%

6 g = RR × ROIC
= 0.47 × 14.52%
= 6.83%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (205,277 × 13.73% – 7,815) ÷ (205,277 + 7,815)
= 9.56%

where:

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

FCFF growth rate (g) forecast

Abbott Laboratories, H-model

Microsoft Excel
Year Value gt
1 g1 6.83%
2 g2 7.51%
3 g3 8.19%
4 g4 8.88%
5 and thereafter g5 9.56%

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)
= 6.83% + (9.56% – 6.83%) × (2 – 1) ÷ (5 – 1)
= 7.51%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 6.83% + (9.56% – 6.83%) × (3 – 1) ÷ (5 – 1)
= 8.19%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 6.83% + (9.56% – 6.83%) × (4 – 1) ÷ (5 – 1)
= 8.88%