DCF Studio

    D · NYQ · Utilities

    Dominion Energy, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -22.82

    Market price

    USD 63.58

    Implied upside

    -135.9%

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

    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 71.6% of revenue against depreciation of 19.6%. 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 -22.82-135.9%
    Exit multiple
    USD 33.88-46.7%
    Market price
    USD 63.58

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -6511928488-32559642440FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 17.5bnUSD 18.5bnUSD 19.5bnUSD 20.7bnUSD 21.9bn+5.8%
    EBITUSD 4.6bnUSD 4.9bnUSD 5.2bnUSD 5.5bnUSD 5.8bn+5.8%
    NOPATUSD 3.8bnUSD 4.0bnUSD 4.2bnUSD 4.5bnUSD 4.7bn+5.8%
    Add depreciation & amortisationUSD 3.4bnUSD 3.6bnUSD 3.8bnUSD 4.1bnUSD 4.3bn+5.8%
    Less capital expenditureUSD -12.5bnUSD -13.2bnUSD -14.0bnUSD -14.8bnUSD -15.7bn+5.8%
    Less increase in working capitalUSD 105.2mUSD 111.3mUSD 117.7mUSD 124.6mUSD 131.8m-5.8%
    Free cashflow to firmUSD -5.2bnUSD -5.5bnUSD -5.8bnUSD -6.2bnUSD -6.5bn-5.8%
    Discount factor0.96780.90650.84910.79540.7450-
    Present valueUSD -5.0bnUSD -5.0bnUSD -4.9bnUSD -4.9bnUSD -4.9bn+0.9%
    Present Value Of The ForecastUSD -24.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.747Reported 0.622, pulled toward 1.0 (Blume)
    Cost of equity9.11%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 55.9bn53.3% of capital
    Total debtUSD 48.9bn46.7% of capital, book value as a proxy
    Tax rate18.4%Effective, capped at statutory
    WACC6.76%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 -22.82

    186% of EV

    Forecast FCFF, final year
    USD -6.5bn
    Capex at depreciation, working capital in reinvestment
    USD 4.7bn
    Less reinvestment at g/ROIC (37.0% of NOPAT)
    USD -1.7bn
    Capitalised
    USD 3.0bn
    ROIC (WACC floor)
    6.8%
    Terminal value, undiscounted
    USD 71.6bn
    Terminal value, discounted
    USD 53.3bn
    Enterprise value
    USD 28.6bn
    Less net debt
    USD 48.7bn
    Equity value
    USD -20.1bn

    Exit at 13.7x EBITDA

    Value per shareUSD 33.88

    131% of EV

    Terminal value, undiscounted
    USD 138.5bn
    Terminal value, discounted
    USD 103.2bn
    Enterprise value
    USD 78.5bn
    Less net debt
    USD 48.7bn
    Equity value
    USD 29.8bn

    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%
    4.76%8.058.518.979.439.88
    5.76%-10.60-10.23-9.87-9.51-9.15
    6.76%-23.41-23.11-22.82-22.52-22.23
    7.76%-32.66-32.42-32.17-31.92-31.68
    8.76%-39.59-39.38-39.17-38.96-38.75

    Outlined: this model. Green text: above today's price of 63.58. 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 year5.8%29.9%+24.1pp
    EBIT margin26.4%54.6%+28.2pp
    Discount rate6.8%3.9%-2.9pp
    Download as Excel

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