DCF Studio

    SO · NYQ · Utilities

    The Southern Company

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 18.35

    Market price

    USD 94.61

    Implied upside

    -80.6%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    AdjustedCapital expenditure runs at 34.9% of revenue against depreciation of 18.4%. A perpetuity has to be a steady state, so the forecast tapers capex to maintenance at depreciation plus the reinvestment terminal growth requires (g/ROIC of NOPAT), and the terminal year carries on from there. The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 18.35-80.6%
    Exit multiple
    USD 76.87-18.7%
    Market price
    USD 94.61

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn5bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 30.9bnUSD 32.7bnUSD 34.4bnUSD 36.2bnUSD 37.8bnUSD 39.4bnUSD 40.9bnUSD 42.2bnUSD 43.5bnUSD 44.6bn+4.2%
    EBITUSD 7.1bnUSD 7.6bnUSD 8.0bnUSD 8.4bnUSD 8.7bnUSD 9.1bnUSD 9.5bnUSD 9.8bnUSD 10.1bnUSD 10.3bn+4.2%
    NOPATUSD 5.9bnUSD 6.2bnUSD 6.6bnUSD 6.9bnUSD 7.2bnUSD 7.5bnUSD 7.8bnUSD 8.1bnUSD 8.3bnUSD 8.5bn+4.2%
    Add depreciation & amortisationUSD 5.7bnUSD 6.0bnUSD 6.3bnUSD 6.7bnUSD 7.0bnUSD 7.3bnUSD 7.5bnUSD 7.8bnUSD 8.0bnUSD 8.2bn+4.2%
    Less capital expenditureUSD -10.8bnUSD -11.1bnUSD -11.3bnUSD -11.5bnUSD -11.7bnUSD -11.8bnUSD -11.8bnUSD -11.8bnUSD -11.7bnUSD -11.5bn+0.7%
    Capex, % of revenue34.9%33.9%32.9%31.9%30.9%29.9%28.8%27.8%26.8%25.8%-
    Less increase in working capitalUSD -88.0mUSD -121.2mUSD -119.1mUSD -115.9mUSD -111.5mUSD -106.0mUSD -99.4mUSD -91.6mUSD -82.8mUSD -73.0m-2.1%
    Free cashflow to firmUSD 708.8mUSD 1.1bnUSD 1.5bnUSD 1.9bnUSD 2.4bnUSD 2.9bnUSD 3.4bnUSD 4.0bnUSD 4.6bnUSD 5.1bn+24.6%
    Discount factor0.96910.91020.85490.80290.75410.70820.66520.62470.58670.5511-
    Present valueUSD 686.9mUSD 958.7mUSD 1.3bnUSD 1.5bnUSD 1.8bnUSD 2.1bnUSD 2.3bnUSD 2.5bnUSD 2.7bnUSD 2.8bn-
    Present Value Of The ForecastUSD 18.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.522Reported 0.286, pulled toward 1.0 (Blume)
    Cost of equity7.10%Risk-free + beta x equity risk premium
    Cost of debt6.73%Risk-free + 184bp, the spread for a BB rating at 2.2x interest cover. Book interest / average debt was lower, at 4.6%.
    Market capitalisationUSD 108.8bn59.5% of capital
    Total debtUSD 74.1bn40.5% of capital, book value as a proxy
    Tax rate17.5%Effective, capped at statutory
    WACC6.47%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 18.35

    80% of EV

    Forecast FCFF, final year
    USD 5.1bn
    Capex at depreciation, working capital in reinvestment
    USD 8.5bn
    Less reinvestment at g/ROIC (38.6% of NOPAT)
    USD -3.3bn
    Capitalised
    USD 5.2bn
    ROIC (WACC floor)
    6.5%
    Terminal value, undiscounted
    USD 134.6bn
    Terminal value, discounted
    USD 74.2bn
    Enterprise value
    USD 92.8bn
    Less net debt
    USD 72.4bn
    Equity value
    USD 20.3bn

    Exit at 13.6x EBITDA

    Value per shareUSD 76.87

    88% of EV

    Terminal value, undiscounted
    USD 252.2bn
    Terminal value, discounted
    USD 139.0bn
    Enterprise value
    USD 157.6bn
    Less net debt
    USD 72.4bn
    Equity value
    USD 85.1bn

    Spread between methods: 123%.

    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%
    4.47%80.4784.3191.09103.81131.63
    5.47%40.9139.1037.2835.4633.65
    6.47%21.2519.8018.3516.9015.45
    7.47%7.035.854.663.472.28
    8.47%-3.69-4.68-5.67-6.66-7.65

    Outlined: this model. Green text: above today's price of 94.61. 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.

    InputActualModelImplied
    Revenue growth, a year0.3%4.2%11.5%
    EBIT margin26.4%23.1%39.8%
    Discount rate-6.5%4.4%
    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.