At today's price, Mercury Systems' stock is pricing in roughly 25.7% annual free-cash-flow growth for the next ten years, at a 10% discount rate. Over the past four years, the company's revenue actually shrank slightly.
At its current price, MRCY implies ~25.7% annual free-cash-flow growth for the next 10 years, discounted at 10%.
Mercury's actual revenue was essentially flat over the past four years, growing -0.1% a year on average.
Required growth vs. historical growth
Required growth from the reverse DCF below. Because free cash flow was negative in FY2022 and FY2023, a five-year FCF CAGR can't be calculated, so revenue growth is used as the historical comparison instead.
Sensitivity: what if the discount rate moves?
| WACC | Required annual growth |
|---|---|
| 8% | 20.4% |
| 10% (base case) | 25.7% |
| 12% | 30.4% |
Across the plausible 8–12% discount-rate range, the required growth rate stays between 20% and 30% — well above anything Mercury has delivered on a top-line basis in the last four years.
What would move this number
- Using a 3-year average FCF ($71.1M) instead of the single FY2026 figure ($68.1M) barely moves the answer — 25.7% becomes 25.2%, since the two bases are within 4.2% of each other.
- Using GAAP diluted weighted-average shares (59.46M) instead of current shares outstanding (60.14M) changes the result by less than a tenth of a point — 25.7% to 25.6%.
- Lowering the terminal growth rate from 2.5% to 2.0% pushes the required growth rate slightly higher, meaning the market's implied bar for Mercury gets even tougher under a more conservative long-run assumption.
Show your work
Five inputs, sources, model assumptions, and the calculation
- Share price$80.61 — stockanalysis.com / stocktitan.net, Sept. 11, 2026 close
- Shares outstanding60,136,133 — 10-K FY2026 cover page, as of July 31, 2026
- Free cash flow (base)$68.087M — 10-K FY2026 cash flow statement: operating cash flow $102.388M − capex $34.301M
- Total debt (revolver)$441.5M — 10-K FY2026, liquidity section
- Cash & equivalents$214.3M — 10-K FY2026, liquidity section, as of July 3, 2026
- Net debt$227.2M — $441.5M − $214.3M
- Discount rate (WACC)10% base case (8% / 12% tested)
Why FY2026's FCF and not a multi-year average: FY2024–2026 free cash flow was $26.1M, $119.0M, and $68.1M — a three-year average of $71.1M. FY2026's actual figure is only 4.2% below that average, well inside our ±40% normalization threshold, so no adjustment was needed.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter. We solve by bisection for the value of g that makes the present value of those cash flows equal today's enterprise value.
| Component | Value |
|---|---|
| Market cap (price × shares) | $4,847.6M |
| Net debt | $227.2M |
| Target enterprise value | $5,074.8M |
EV = Σ(t=1..10) FCF₀×(1+g)ᵗ/(1+WACC)ᵗ + [FCF₀×(1+g)¹⁰×1.025/(WACC−0.025)]/(1+WACC)¹⁰, solved for g by bisection (200 iterations).
The fine print
- Change the discount rate, the projection window, or the terminal growth rate, and the answer moves.
- A reverse DCF shows what the market currently expects — it does not say what the stock is "worth."
- Whether 25.7% annual FCF growth is realistic depends on whether the $1.9B backlog converts on schedule and whether the FY2024 crisis is truly behind the company — not on the math itself.
- Any investment decision, and its outcome, is your own responsibility.
How this number is built, and how banks, REITs, and negative cash flow are handled: see our methodology.
Frequently asked questions
What growth rate does MRCY's stock price assume?
At its current price, Mercury Systems is pricing in roughly 25.7% annual free-cash-flow growth for the next ten years, discounted at a 10% rate.
How does that compare to Mercury's actual growth?
Mercury's revenue was essentially flat over the past four fiscal years, averaging -0.1% annual growth — far below the roughly 25.7% annual free-cash-flow growth the current price requires.
What share price was used for this analysis?
This analysis used $80.61, Mercury Systems' closing price on Sept. 11, 2026.