DCF Studio

    NEE · NYQ · Utilities

    NextEra Energy, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 10.19

    Market price

    USD 80.47

    Implied upside

    -87.3%

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

    AdjustedCapital expenditure runs at 37.2% of revenue against depreciation of 23.3%. 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 10.19-87.3%
    Exit multiple
    USD 93.60+16.3%
    Market price
    USD 80.47

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 30.0bnUSD 32.8bnUSD 35.9bnUSD 39.2bnUSD 42.9bn+9.4%
    EBITUSD 8.2bnUSD 9.0bnUSD 9.9bnUSD 10.8bnUSD 11.8bn+9.4%
    NOPATUSD 7.1bnUSD 7.8bnUSD 8.5bnUSD 9.3bnUSD 10.2bn+9.4%
    Add depreciation & amortisationUSD 7.0bnUSD 7.7bnUSD 8.4bnUSD 9.1bnUSD 10.0bn+9.4%
    Less capital expenditureUSD -11.1bnUSD -12.2bnUSD -13.3bnUSD -14.6bnUSD -15.9bn+9.4%
    Less increase in working capitalUSD -360.1mUSD -393.8mUSD -430.7mUSD -471.0mUSD -515.2m+9.4%
    Free cashflow to firmUSD 2.6bnUSD 2.8bnUSD 3.1bnUSD 3.4bnUSD 3.7bn+9.4%
    Discount factor0.96470.89770.83540.77740.7234-
    Present valueUSD 2.5bnUSD 2.6bnUSD 2.6bnUSD 2.6bnUSD 2.7bn+1.8%
    Present Value Of The ForecastUSD 13.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.761Reported 0.644, pulled toward 1.0 (Blume)
    Cost of equity9.19%Risk-free + beta x equity risk premium
    Cost of debt5.14%Interest expense / average total debt
    Market capitalisationUSD 167.9bn63.7% of capital
    Total debtUSD 95.6bn36.3% of capital, book value as a proxy
    Tax rate13.8%Effective, capped at statutory
    WACC7.46%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 10.19

    89% of EV

    Forecast FCFF, final year
    USD 3.7bn
    Capex at depreciation, working capital in reinvestment
    USD 10.2bn
    Less reinvestment at g/ROIC (33.5% of NOPAT)
    USD -3.4bn
    Capitalised
    USD 6.8bn
    ROIC (WACC floor)
    7.5%
    Terminal value, undiscounted
    USD 139.7bn
    Terminal value, discounted
    USD 101.1bn
    Enterprise value
    USD 114.0bn
    Less net debt
    USD 92.8bn
    Equity value
    USD 21.2bn

    Exit at 17.4x EBITDA

    Value per shareUSD 93.60

    95% of EV

    Terminal value, undiscounted
    USD 379.8bn
    Terminal value, discounted
    USD 274.8bn
    Enterprise value
    USD 287.8bn
    Less net debt
    USD 92.8bn
    Equity value
    USD 195.0bn

    Spread between methods: 161%.

    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%
    5.46%33.4233.7734.1234.4734.82
    6.46%19.6919.9820.2620.5520.83
    7.46%9.729.9610.1910.4310.67
    8.46%2.172.372.572.772.97
    9.46%-3.74-3.56-3.39-3.22-3.05

    Outlined: this model. Green text: above today's price of 80.47. 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 year9.4%30.3%+21.0pp
    EBIT margin27.5%57.0%+29.5pp
    Discount rate7.5%4.1%-3.3pp
    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.