DCF Studio

    NRG · NYQ · Utilities

    NRG Energy, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 22.83

    Market price

    USD 103.66

    Implied upside

    -78.0%

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

    Value Per Share

    Perpetuity growth
    USD 22.83-78.0%
    Exit multiple
    USD 63.01-39.2%
    Market price
    USD 103.66

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 30.4bnUSD 30.2bnUSD 29.9bnUSD 29.6bnUSD 29.4bn-0.9%
    EBITUSD 1.4bnUSD 1.3bnUSD 1.3bnUSD 1.3bnUSD 1.3bn-0.9%
    NOPATUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.0bnUSD 1.0bn-0.9%
    Add depreciation & amortisationUSD 987.7mUSD 979.0mUSD 970.3mUSD 961.7mUSD 953.2m-0.9%
    Less capital expenditureUSD -671.2mUSD -665.3mUSD -659.4mUSD -653.6mUSD -647.8m-0.9%
    Less increase in working capitalUSD -21.9mUSD -21.7mUSD -21.5mUSD -21.3mUSD -21.1m-0.9%
    Free cashflow to firmUSD 1.4bnUSD 1.4bnUSD 1.3bnUSD 1.3bnUSD 1.3bn-0.9%
    Discount factor0.96160.88910.82210.76010.7028-
    Present valueUSD 1.3bnUSD 1.2bnUSD 1.1bnUSD 1.0bnUSD 927.9m-8.4%
    Present Value Of The ForecastUSD 5.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.116Reported 1.173, pulled toward 1.0 (Blume)
    Cost of equity11.14%Risk-free + beta x equity risk premium
    Cost of debt5.37%Interest expense / average total debt
    Market capitalisationUSD 21.8bn56.7% of capital
    Total debtUSD 16.6bn43.3% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.15%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 22.83

    66% of EV

    Forecast FCFF, final year
    USD 1.3bn
    Capex at depreciation, working capital in reinvestment
    USD 1.0bn
    Less reinvestment at g/ROIC (17.5% of NOPAT)
    USD -181.5m
    Capitalised
    USD 854.4m
    ROIC (reported)
    14.3%
    Terminal value, undiscounted
    USD 15.5bn
    Terminal value, discounted
    USD 10.9bn
    Enterprise value
    USD 16.5bn
    Less net debt
    USD 11.9bn
    Equity value
    USD 4.5bn

    Exit at 11.9x EBITDA

    Value per shareUSD 63.01

    77% of EV

    Terminal value, undiscounted
    USD 26.9bn
    Terminal value, discounted
    USD 18.9bn
    Enterprise value
    USD 24.5bn
    Less net debt
    USD 11.9bn
    Equity value
    USD 12.5bn

    Spread between methods: 94%.

    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%
    6.15%47.0553.4161.4772.0586.56
    7.15%30.0233.6538.0443.4550.31
    8.15%18.0620.2622.8325.8729.53
    9.15%9.1810.5512.1213.9216.02
    10.15%2.313.194.165.266.50

    Outlined: this model. Green text: above today's price of 103.66. 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-0.9%14.1%+15.0pp
    EBIT margin4.5%9.2%+4.7pp
    Discount rate8.2%5.1%-3.0pp
    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.