Discounted cash flow valuation

Project each segment, define unlevered free cash flow line by line and value it by perpetuity growth and exit multiple. Every input ties to its source

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XLSXPPTX14 steps

The problem

Segment margins twenty points apart, a July guide cut and a June balance sheet

Otis cut its 2026 guide on July 22, taking adjusted EPS to $4.01 to $4.05 from $4.20 to $4.24. Service earned a 25.1% margin in 2025 and New Equipment 4.8%, so one blended margin misprices the mix. Restructuring of $67 to $130 million a year since 2023 sits outside adjusted operating profit. The latest balance sheet is June 30, three months before the valuation date

The request

Build an Otis DCF at the October 1 close, off the 2025 10-K and June 10-Q. Project New Equipment and Service separately, attached consensus as base case and management's case beside it: the July guide, then the 2024 investor day targets only if reaffirmed on the July call. Define unlevered free cash flow line by line, keeping recurring restructuring in. WACC from a cited Treasury yield, a regressed beta checked against KONE and Schindler, and market weights. Terminal value by perpetuity growth and exit multiple, implied cross checks, mid year convention, a WACC by terminal growth grid, the bridge to value per diluted share and a one page summary. Flag what doesn't tie, and don't change consensus without asking me.

OTIS consensus Oct 1.xlsx

How Axe works

ApprovedChanges asked

Your reviewApprove, or say what to change

Approved or changes

Model and summary pageModel, summary page and tie out

Final reviewApprove the revised files

Revised model and summary pageRevised files and tie out

Step

Discount the cash flows

Prompt

Sent to the model at this step

Discount each period's unlevered free cash flow to October 1 on the mid year convention: the fourth quarter stub at half its length, and each full year at the stub plus the full years before it plus half a year. The latest balance sheet is June 30, so discount the fourth quarter stub from October 1, bridge from June 30 net debt, and state the third quarter cash flow that falls between them. Build a normalized terminal year from 2031: margins at a level the business can hold, capital expenditures against depreciation and the working capital change set to fund the terminal growth rate, restructuring at its average run rate and tax at the operating rate. Calculate terminal value two ways. Perpetuity growth on the normalized year, discounted on the same mid year basis as 2031. An exit multiple of 2031 EBITDA before restructuring, the basis trading multiples use, discounted from the end of 2031 and chosen against Otis's own five year trading range and KONE and Schindler, with their IFRS EBITDA restated to the same lease basis; state that the cash flows deduct restructuring while this EBITDA leaves it out. Show the multiple implied by the perpetuity value, the growth rate implied by the exit value, and the terminal value's share of enterprise value under each. Flag an implied growth rate above long run nominal GDP growth or an implied multiple outside the trading range.

Uses

Company
Valuation date
Tied historicals
Tied projections
Free cash flow
Discount rate

Produces

Valuation

What you get back

XLSXDCF modelHistoricals, both cases, free cash flow, WACC, terminal value, bridge and sensitivity tabs

PPTXDCF summary pageValue per share by perpetuity growth and exit multiple, assumptions and the sensitivity grid

Tie out reportEach figure marked tied, recalculated or open, with every correction

Make it yours

Swap in your house case, set your bank's WACC conventions and sensitivity ranges, or change the page layout. Every step and every prompt can be edited

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