What is ELY's DCF valuation?

Callaway Golf Co (ELY) DCF Valuation Analysis

Executive Summary

As of July 10, 2025, Callaway Golf Co has a Discounted Cash Flow (DCF) derived fair value of $30.03 per share. With the current market price at $21.33, this represents a potential upside of 40.8%.

Key Metrics Value
DCF Fair Value (5-year) $19.31
DCF Fair Value (10-year) $30.03
Potential Upside (5-year) -9.5%
Potential Upside (10-year) 40.8%
Discount Rate (WACC) 9.6% - 14.5%

Financial Performance & Projections

Revenue Trends

Revenue is projected to grow from $3133 million in 12-2021 to $7204 million by 12-2031, representing a compound annual growth rate of approximately 8.7%.

Fiscal Year Revenue (USD millions) Growth
12-2021 3133 97%
12-2022 3541 13%
12-2023 3720 5%
12-2024 4184 12%
12-2025 4662 11%
12-2026 5276 13%
12-2027 5761 9%
12-2028 6145 7%
12-2029 6515 6%
12-2030 6861 5%
12-2031 7204 5%

Profitability Projections

Net profit margin is expected to improve from 10% in 12-2021 to 18% by 12-2031, driven by operational efficiency and economies of scale.

Fiscal Year Net Profit (USD millions) Profit Margin
12-2021 322 10%
12-2022 387 11%
12-2023 466 13%
12-2024 587 14%
12-2025 722 15%
12-2026 889 17%
12-2027 985 17%
12-2028 1067 17%
12-2029 1148 18%
12-2030 1226 18%
12-2031 1305 18%

DCF Model Components

1. Capital Expenditures (CapEx)

with a 5-year average of $96 million. Projected CapEx is expected to maintain at approximately 4% of revenue.

2. Depreciation & Amortization

Depreciation is based on an average useful life of 5 years for capital assets.

Fiscal Year D&A (USD millions)
12-2022 121
12-2023 146
12-2024 170
12-2025 203
12-2026 183
12-2027 202

3. Working Capital Requirements

Net working capital is expected to increase gradually, with projected changes affecting free cash flow.

Components Average Days
Days Receivables 25
Days Inventory 157
Days Payables 31

4. Free Cash Flow Projections

Fiscal Year EBITDA Tax CapEx Change in NWC FCF
3M/2022 106 20 38 52 (4)
2023 537 97 159 (39) 319
2024 687 123 179 32 353
2025 859 151 200 94 414
2026 1013 186 226 58 544

DCF Valuation Parameters

Key Assumptions

  • Discount Rate (WACC): WACC / Discount Rate (selected: 9.6% - 14.5%)
  • Long-Term Growth Rate: Long-term Growth Rate (selected: 3.0% - 5.0%)
  • Terminal EV/EBITDA Multiple: 8.5x (based on peer average)

Valuation Summary

Valuation Method Fair Price (USD) Potential Upside
5-Year DCF (Growth) 19.31 -9.5%
10-Year DCF (Growth) 30.03 40.8%
5-Year DCF (EBITDA) 24.65 15.6%
10-Year DCF (EBITDA) 32.72 53.4%

Enterprise Value Breakdown

  • 5-Year Model: $4,722M
  • 10-Year Model: $6,703M

Investment Conclusion

Is Callaway Golf Co (ELY) a buy or a sell? Callaway Golf Co is definitely a buy. Based on our DCF analysis, Callaway Golf Co (ELY) appears to be significantly undervalued with upside potential of 40.8%. The company's strong projected growth in revenue and profitability, coupled with consistent capital expenditure, supports our positive outlook on its intrinsic value.

Key investment drivers include:

  • Expanding profit margins (from 10% to 18%)
  • Steady revenue growth (8.7% CAGR)
  • Strong free cash flow generation

Investors should consider a strong buy at the current market price of $21.33.