DCF Studio

    CEG · NMS · Utilities

    Constellation Energy Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 59.91

    Market price

    USD 254.71

    Implied upside

    -76.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 9.8% of revenue against depreciation of 7.8%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 59.91-76.5%
    Exit multiple
    USD 172.54-32.3%
    Market price
    USD 254.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 25.9bnUSD 26.3bnUSD 26.7bnUSD 27.1bnUSD 27.5bn+1.5%
    EBITUSD 2.9bnUSD 3.0bnUSD 3.0bnUSD 3.0bnUSD 3.1bn+1.5%
    NOPATUSD 2.3bnUSD 2.3bnUSD 2.4bnUSD 2.4bnUSD 2.4bn+1.5%
    Add depreciation & amortisationUSD 2.0bnUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.1bn+1.5%
    Less capital expenditureUSD -2.5bnUSD -2.6bnUSD -2.6bnUSD -2.6bnUSD -2.7bn+1.5%
    Less increase in working capitalUSD -1.3mUSD -1.4mUSD -1.4mUSD -1.4mUSD -1.4m+1.5%
    Free cashflow to firmUSD 1.8bnUSD 1.8bnUSD 1.8bnUSD 1.9bnUSD 1.9bn+1.5%
    Discount factor0.95190.86260.78160.70820.6417-
    Present valueUSD 1.7bnUSD 1.6bnUSD 1.4bnUSD 1.3bnUSD 1.2bn-8.1%
    Present Value Of The ForecastUSD 7.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.078Reported 1.117, pulled toward 1.0 (Blume)
    Cost of equity10.93%Risk-free + beta x equity risk premium
    Cost of debt5.87%Interest expense / average total debt
    Market capitalisationUSD 90.2bn90.9% of capital
    Total debtUSD 9.0bn9.1% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC10.36%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 59.91

    70% of EV

    Forecast FCFF, final year
    USD 1.9bn
    Capex at depreciation, working capital in reinvestment
    USD 2.5bn
    Less reinvestment at g/ROIC (17.7% of NOPAT)
    USD -435.3m
    Capitalised
    USD 2.0bn
    ROIC (reported)
    14.1%
    Terminal value, undiscounted
    USD 26.4bn
    Terminal value, discounted
    USD 16.9bn
    Enterprise value
    USD 24.2bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 18.8bn

    Exit at 15.6x EBITDA

    Value per shareUSD 172.54

    88% of EV

    Terminal value, undiscounted
    USD 81.5bn
    Terminal value, discounted
    USD 52.3bn
    Enterprise value
    USD 59.5bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 54.2bn

    Spread between methods: 97%.

    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%
    8.36%79.1482.0985.5189.5494.35
    9.36%66.9068.7570.8473.2476.00
    10.36%57.4458.6259.9161.3663.00
    11.36%49.9250.6551.4552.3353.30
    12.36%43.7844.2344.7145.2345.78

    Outlined: this model. Green text: above today's price of 254.71. 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.

    InputModelImpliedGap
    Revenue growth, every year1.5%34.1%+32.7pp
    EBIT margin11.2%37.6%+26.3pp
    Discount rate10.4%4.7%-5.7pp
    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.