DCF Studio

    DUK · NYQ · Utilities

    Duke Energy Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 30.22

    Market price

    USD 117.53

    Implied upside

    -74.3%

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

    AdjustedCapital expenditure runs at 41.7% of revenue against depreciation of 21.6%. 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 30.22-74.3%
    Exit multiple
    USD 90.43-23.1%
    Market price
    USD 117.53

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 33.5bnUSD 34.8bnUSD 36.1bnUSD 37.5bnUSD 39.0bn+3.9%
    EBITUSD 8.3bnUSD 8.7bnUSD 9.0bnUSD 9.3bnUSD 9.7bn+3.9%
    NOPATUSD 7.5bnUSD 7.8bnUSD 8.1bnUSD 8.4bnUSD 8.7bn+3.9%
    Add depreciation & amortisationUSD 7.2bnUSD 7.5bnUSD 7.8bnUSD 8.1bnUSD 8.4bn+3.9%
    Less capital expenditureUSD -14.0bnUSD -14.5bnUSD -15.1bnUSD -15.7bnUSD -16.3bn+3.9%
    Less increase in working capitalUSD 798.5mUSD 829.4mUSD 861.5mUSD 894.8mUSD 929.4m-3.9%
    Free cashflow to firmUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.7bnUSD 1.8bn+3.9%
    Discount factor0.96980.91210.85780.80670.7587-
    Present valueUSD 1.5bnUSD 1.5bnUSD 1.4bnUSD 1.4bnUSD 1.4bn-2.3%
    Present Value Of The ForecastUSD 7.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.574Reported 0.364, pulled toward 1.0 (Blume)
    Cost of equity8.15%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 91.6bn50.2% of capital
    Total debtUSD 90.9bn49.8% of capital, book value as a proxy
    Tax rate10.2%Effective, capped at statutory
    WACC6.33%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 30.22

    94% of EV

    Forecast FCFF, final year
    USD 1.8bn
    Capex at depreciation, working capital in reinvestment
    USD 8.7bn
    Less reinvestment at g/ROIC (39.5% of NOPAT)
    USD -3.4bn
    Capitalised
    USD 5.3bn
    ROIC (WACC floor)
    6.3%
    Terminal value, undiscounted
    USD 141.0bn
    Terminal value, discounted
    USD 107.0bn
    Enterprise value
    USD 114.1bn
    Less net debt
    USD 90.6bn
    Equity value
    USD 23.5bn

    Exit at 11.2x EBITDA

    Value per shareUSD 90.43

    96% of EV

    Terminal value, undiscounted
    USD 202.7bn
    Terminal value, discounted
    USD 153.8bn
    Enterprise value
    USD 160.9bn
    Less net debt
    USD 90.6bn
    Equity value
    USD 70.3bn

    Spread between methods: 100%.

    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%
    4.33%129.16142.20161.88195.69269.23
    5.33%61.7162.5463.3764.2165.04
    6.33%28.8729.5430.2130.8931.56
    7.33%5.205.766.316.877.43
    8.33%-12.61-12.14-11.67-11.20-10.73

    Outlined: this model. Green text: above today's price of 117.53. 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 year3.9%13.0%+9.1pp
    EBIT margin24.9%36.8%+11.9pp
    Discount rate6.3%4.7%-1.7pp
    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.