DCF Studio

    DTE · NYQ · Utilities

    DTE Energy Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -43.85

    Market price

    USD 128.52

    Implied upside

    -134.1%

    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 28.1% of revenue against depreciation of 8.7%. 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 -43.85-134.1%
    Exit multiple
    USD -1.08-100.8%
    Market price
    USD 128.52

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -696343294-3481716470FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 14.8bnUSD 13.9bnUSD 13.0bnUSD 12.2bnUSD 11.4bn-6.3%
    EBITUSD 2.3bnUSD 2.1bnUSD 2.0bnUSD 1.9bnUSD 1.7bn-6.3%
    NOPATUSD 2.1bnUSD 2.0bnUSD 1.9bnUSD 1.8bnUSD 1.6bn-6.3%
    Add depreciation & amortisationUSD 1.3bnUSD 1.2bnUSD 1.1bnUSD 1.1bnUSD 990.4m-6.3%
    Less capital expenditureUSD -4.2bnUSD -3.9bnUSD -3.7bnUSD -3.4bnUSD -3.2bn-6.3%
    Less increase in working capitalUSD 48.4mUSD 45.4mUSD 42.5mUSD 39.8mUSD 37.3m+6.3%
    Free cashflow to firmUSD -696.3mUSD -652.4mUSD -611.3mUSD -572.7mUSD -536.6m+6.3%
    Discount factor0.96900.90990.85450.80240.7534-
    Present valueUSD -674.8mUSD -593.7mUSD -522.3mUSD -459.5mUSD -404.3m+12.0%
    Present Value Of The ForecastUSD -2.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.590Reported 0.388, pulled toward 1.0 (Blume)
    Cost of equity8.24%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 26.7bn50.4% of capital
    Total debtUSD 26.3bn49.6% of capital, book value as a proxy
    Tax rate5.7%Effective, capped at statutory
    WACC6.49%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 -43.85

    116% of EV

    Forecast FCFF, final year
    USD -536.6m
    Capex at depreciation, working capital in reinvestment
    USD 1.7bn
    Less reinvestment at g/ROIC (38.5% of NOPAT)
    USD -636.4m
    Capitalised
    USD 1.0bn
    ROIC (WACC floor)
    6.5%
    Terminal value, undiscounted
    USD 26.1bn
    Terminal value, discounted
    USD 19.7bn
    Enterprise value
    USD 17.0bn
    Less net debt
    USD 26.1bn
    Equity value
    USD -9.1bn

    Exit at 13.9x EBITDA

    Value per shareUSD -1.08

    110% of EV

    Terminal value, undiscounted
    USD 37.8bn
    Terminal value, discounted
    USD 28.5bn
    Enterprise value
    USD 25.9bn
    Less net debt
    USD 26.1bn
    Equity value
    USD -222.9m

    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%
    4.49%28.2040.8559.5790.46151.91
    5.49%-18.75-15.85-12.17-7.20-0.01
    6.49%-44.78-44.32-43.85-43.39-42.93
    7.49%-60.42-60.04-59.65-59.27-58.88
    8.49%-72.18-71.85-71.53-71.20-70.88

    Outlined: this model. Green text: above today's price of 128.52. 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 year-6.3%16.7%+23.0pp
    EBIT margin15.2%34.9%+19.7pp
    Discount rate6.5%4.0%-2.5pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.