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    EXC · NMS · Utilities

    Exelon Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 10.93

    Market price

    USD 42.07

    Implied upside

    -74.0%

    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 34.4% of revenue against depreciation of 13.1%. 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 10.93-74.0%
    Exit multiple
    USD 35.57-15.5%
    Market price
    USD 42.07

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -4049757535-20248787670FY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 26.3bnUSD 28.5bnUSD 30.8bnUSD 33.4bnUSD 36.2bn+8.3%
    EBITUSD 5.0bnUSD 5.4bnUSD 5.8bnUSD 6.3bnUSD 6.9bn+8.3%
    NOPATUSD 4.3bnUSD 4.6bnUSD 5.0bnUSD 5.4bnUSD 5.9bn+8.3%
    Add depreciation & amortisationUSD 3.5bnUSD 3.7bnUSD 4.1bnUSD 4.4bnUSD 4.8bn+8.3%
    Less capital expenditureUSD -9.0bnUSD -9.8bnUSD -10.6bnUSD -11.5bnUSD -12.4bn+8.3%
    Less increase in working capitalUSD -1.6bnUSD -1.8bnUSD -1.9bnUSD -2.1bnUSD -2.2bn+8.3%
    Free cashflow to firmUSD -2.9bnUSD -3.2bnUSD -3.5bnUSD -3.7bnUSD -4.0bn-8.3%
    Discount factor0.97070.91470.86190.81220.7653-
    Present valueUSD -2.9bnUSD -2.9bnUSD -3.0bnUSD -3.0bnUSD -3.1bn-2.1%
    Present Value Of The ForecastUSD -14.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.591Reported 0.389, pulled toward 1.0 (Blume)
    Cost of equity8.25%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 43.3bn46.4% of capital
    Total debtUSD 50.1bn53.6% of capital, book value as a proxy
    Tax rate14.2%Effective, capped at statutory
    WACC6.13%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 10.93

    125% of EV

    Forecast FCFF, final year
    USD -4.0bn
    Capex at depreciation, working capital in reinvestment
    USD 5.9bn
    Less reinvestment at g/ROIC (40.8% of NOPAT)
    USD -2.4bn
    Capitalised
    USD 3.5bn
    ROIC (WACC floor)
    6.1%
    Terminal value, undiscounted
    USD 98.7bn
    Terminal value, discounted
    USD 75.5bn
    Enterprise value
    USD 60.6bn
    Less net debt
    USD 49.5bn
    Equity value
    USD 11.2bn

    Exit at 11.3x EBITDA

    Value per shareUSD 35.57

    117% of EV

    Terminal value, undiscounted
    USD 131.6bn
    Terminal value, discounted
    USD 100.7bn
    Enterprise value
    USD 85.8bn
    Less net debt
    USD 49.5bn
    Equity value
    USD 36.4bn

    Spread between methods: 106%.

    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%
    4.13%66.2674.4587.38111.37172.96
    5.13%27.9328.3828.8329.2829.73
    6.13%10.2110.5710.9311.3011.66
    7.13%-2.31-2.01-1.71-1.42-1.12
    8.13%-11.56-11.31-11.06-10.81-10.56

    Outlined: this model. Green text: above today's price of 42.07. 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 year8.3%20.1%+11.8pp
    EBIT margin18.9%25.2%+6.2pp
    Discount rate6.1%4.8%-1.4pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.