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    Entergy Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -29.04

    Market price

    USD 102.01

    Implied upside

    -128.5%

    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 47.5% of revenue against depreciation of 18.6%. 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 -29.04-128.5%
    Exit multiple
    USD 26.05-74.5%
    Market price
    USD 102.01

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -1409144956-7045724780FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 12.7bnUSD 12.4bnUSD 12.2bnUSD 11.9bnUSD 11.7bn-2.0%
    EBITUSD 2.7bnUSD 2.6bnUSD 2.5bnUSD 2.5bnUSD 2.4bn-2.0%
    NOPATUSD 2.1bnUSD 2.1bnUSD 2.0bnUSD 2.0bnUSD 1.9bn-2.0%
    Add depreciation & amortisationUSD 2.4bnUSD 2.3bnUSD 2.3bnUSD 2.2bnUSD 2.2bn-2.0%
    Less capital expenditureUSD -6.0bnUSD -5.9bnUSD -5.8bnUSD -5.7bnUSD -5.5bn-2.0%
    Less increase in working capitalUSD 151.4mUSD 148.3mUSD 145.3mUSD 142.4mUSD 139.5m+2.0%
    Free cashflow to firmUSD -1.4bnUSD -1.4bnUSD -1.4bnUSD -1.3bnUSD -1.3bn+2.0%
    Discount factor0.96770.90620.84860.79470.7442-
    Present valueUSD -1.4bnUSD -1.3bnUSD -1.1bnUSD -1.1bnUSD -966.5m+8.2%
    Present Value Of The ForecastUSD -5.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.652Reported 0.481, pulled toward 1.0 (Blume)
    Cost of equity8.59%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 48.7bn61.2% of capital
    Total debtUSD 30.9bn38.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.79%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 -29.04

    136% of EV

    Forecast FCFF, final year
    USD -1.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.9bn
    Less reinvestment at g/ROIC (36.8% of NOPAT)
    USD -711.8m
    Capitalised
    USD 1.2bn
    ROIC (WACC floor)
    6.8%
    Terminal value, undiscounted
    USD 29.2bn
    Terminal value, discounted
    USD 21.7bn
    Enterprise value
    USD 15.9bn
    Less net debt
    USD 29.0bn
    Equity value
    USD -13.1bn

    Exit at 13.5x EBITDA

    Value per shareUSD 26.05

    114% of EV

    Terminal value, undiscounted
    USD 62.5bn
    Terminal value, discounted
    USD 46.5bn
    Enterprise value
    USD 40.7bn
    Less net debt
    USD 29.0bn
    Equity value
    USD 11.7bn

    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%
    4.78%-2.35-0.970.863.538.01
    5.79%-19.11-18.82-18.53-18.25-17.96
    6.78%-29.51-29.27-29.04-28.80-28.56
    7.79%-37.08-36.88-36.69-36.49-36.29
    8.79%-42.80-42.63-42.47-42.30-42.13

    Outlined: this model. Green text: above today's price of 102.01. 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-2.0%37.3%+39.3pp
    EBIT margin20.9%61.6%+40.7pp
    Discount rate6.8%3.6%-3.2pp
    Download as Excel

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