DCF Studio

    AEP · NMS · Utilities

    American Electric Power Company, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 24.97

    Market price

    USD 130.33

    Implied upside

    -80.8%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 44.4% of revenue against depreciation of 16.7%. A perpetuity has to be a steady state, so the forecast tapers capex to maintenance at depreciation plus the reinvestment terminal growth requires (g/ROIC of NOPAT), and the terminal year carries on from there. The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 24.97-80.8%
    Exit multiple
    USD 93.74-28.1%
    Market price
    USD 130.33

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -2bn1bn4bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 23.5bnUSD 25.0bnUSD 26.3bnUSD 27.7bnUSD 29.0bnUSD 30.2bnUSD 31.4bnUSD 32.4bnUSD 33.4bnUSD 34.2bn+4.2%
    EBITUSD 5.1bnUSD 5.4bnUSD 5.7bnUSD 5.9bnUSD 6.2bnUSD 6.5bnUSD 6.7bnUSD 7.0bnUSD 7.2bnUSD 7.3bn+4.2%
    NOPATUSD 4.9bnUSD 5.2bnUSD 5.5bnUSD 5.8bnUSD 6.1bnUSD 6.3bnUSD 6.6bnUSD 6.8bnUSD 7.0bnUSD 7.2bn+4.2%
    Add depreciation & amortisationUSD 3.9bnUSD 4.2bnUSD 4.4bnUSD 4.6bnUSD 4.8bnUSD 5.0bnUSD 5.2bnUSD 5.4bnUSD 5.6bnUSD 5.7bn+4.2%
    Less capital expenditureUSD -10.4bnUSD -10.5bnUSD -10.5bnUSD -10.4bnUSD -10.3bnUSD -10.0bnUSD -9.7bnUSD -9.3bnUSD -8.9bnUSD -8.3bn-2.5%
    Capex, % of revenue44.4%42.1%39.9%37.7%35.4%33.2%31.0%28.8%26.5%24.3%-
    Less increase in working capitalUSD -100.5mUSD -85.0mUSD -83.6mUSD -81.3mUSD -78.1mUSD -74.2mUSD -69.4mUSD -63.8mUSD -57.4mUSD -50.3m-7.4%
    Free cashflow to firmUSD -1.7bnUSD -1.2bnUSD -688.8mUSD -100.6mUSD 547.5mUSD 1.3bnUSD 2.0bnUSD 2.8bnUSD 3.6bnUSD 4.5bn-
    Discount factor0.96740.90540.84740.79310.74220.69460.65010.60850.56940.5329-
    Present valueUSD -1.6bnUSD -1.1bnUSD -583.6mUSD -79.8mUSD 406.3mUSD 869.2mUSD 1.3bnUSD 1.7bnUSD 2.1bnUSD 2.4bn-
    Present Value Of The ForecastUSD 5.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.626Reported 0.442, pulled toward 1.0 (Blume)
    Cost of equity7.54%Risk-free + beta x equity risk premium
    Cost of debt6.00%Risk-free + 111bp, the spread for a BBB rating at 2.7x interest cover. Book interest / average debt was lower, at 4.3%.
    Market capitalisationUSD 71.0bn58.9% of capital
    Total debtUSD 49.5bn41.1% of capital, book value as a proxy
    Tax rate2.5%Effective, capped at statutory
    WACC6.85%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 24.97

    91% of EV

    Forecast FCFF, final year
    USD 4.5bn
    Capex at depreciation, working capital in reinvestment
    USD 7.2bn
    Less reinvestment at g/ROIC (36.5% of NOPAT)
    USD -2.6bn
    Capitalised
    USD 4.6bn
    ROIC (WACC floor)
    6.8%
    Terminal value, undiscounted
    USD 107.2bn
    Terminal value, discounted
    USD 57.2bn
    Enterprise value
    USD 62.5bn
    Less net debt
    USD 49.1bn
    Equity value
    USD 13.4bn

    Exit at 13.5x EBITDA

    Value per shareUSD 93.74

    95% of EV

    Terminal value, undiscounted
    USD 176.6bn
    Terminal value, discounted
    USD 94.1bn
    Enterprise value
    USD 99.5bn
    Less net debt
    USD 49.1bn
    Equity value
    USD 50.4bn

    Spread between methods: 116%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.85%117.13121.86129.91143.98170.77
    5.85%59.1356.2553.3650.4747.59
    6.85%29.6327.3024.9722.6420.31
    7.85%8.046.124.202.280.36
    8.85%-8.34-9.95-11.56-13.17-14.78

    Outlined: this model. Green text: above today's price of 130.33. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year3.7%4.6%11.5%
    EBIT margin24.6%21.5%34.5%
    Discount rate-6.8%4.8%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.