DCF Studio

    WEC · NYQ · Utilities

    WEC Energy Group, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 4.16

    Market price

    USD 103.17

    Implied upside

    -96.0%

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

    Wrong toolThis model values the shares at 4.0% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedCapital expenditure runs at 32.3% of revenue against depreciation of 14.2%. 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 4.16-96.0%
    Exit multiple
    USD 60.02-41.8%
    Market price
    USD 103.17

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m98m196mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 9.9bnUSD 9.9bnUSD 10.0bnUSD 10.1bnUSD 10.1bn+0.7%
    EBITUSD 2.3bnUSD 2.3bnUSD 2.3bnUSD 2.3bnUSD 2.4bn+0.7%
    NOPATUSD 2.0bnUSD 2.0bnUSD 2.0bnUSD 2.0bnUSD 2.1bn+0.7%
    Add depreciation & amortisationUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bn+0.7%
    Less capital expenditureUSD -3.2bnUSD -3.2bnUSD -3.2bnUSD -3.3bnUSD -3.3bn+0.7%
    Less increase in working capitalUSD -11.6mUSD -11.7mUSD -11.8mUSD -11.9mUSD -11.9m+0.7%
    Free cashflow to firmUSD 190.9mUSD 192.3mUSD 193.6mUSD 195.0mUSD 196.3m+0.7%
    Discount factor0.96750.90550.84750.79320.7425-
    Present valueUSD 184.7mUSD 174.1mUSD 164.1mUSD 154.6mUSD 145.8m-5.7%
    Present Value Of The ForecastUSD 823.3m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.636Reported 0.457, pulled toward 1.0 (Blume)
    Cost of equity8.50%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 33.6bn60.1% of capital
    Total debtUSD 22.3bn39.9% of capital, book value as a proxy
    Tax rate13.0%Effective, capped at statutory
    WACC6.84%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 4.16

    97% of EV

    Forecast FCFF, final year
    USD 196.3m
    Capex at depreciation, working capital in reinvestment
    USD 2.1bn
    Less reinvestment at g/ROIC (36.5% of NOPAT)
    USD -749.3m
    Capitalised
    USD 1.3bn
    ROIC (WACC floor)
    6.8%
    Terminal value, undiscounted
    USD 30.7bn
    Terminal value, discounted
    USD 22.8bn
    Enterprise value
    USD 23.6bn
    Less net debt
    USD 22.3bn
    Equity value
    USD 1.3bn

    Exit at 14.5x EBITDA

    Value per shareUSD 60.02

    98% of EV

    Terminal value, undiscounted
    USD 55.1bn
    Terminal value, discounted
    USD 40.9bn
    Enterprise value
    USD 41.7bn
    Less net debt
    USD 22.3bn
    Equity value
    USD 19.4bn

    Spread between methods: 174%.

    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%
    4.84%49.4054.6862.0373.1392.18
    5.84%19.0019.4319.8520.2720.70
    6.84%3.473.814.154.504.84
    7.84%-7.98-7.69-7.41-7.12-6.83
    8.84%-16.74-16.50-16.25-16.01-15.76

    Outlined: this model. Green text: above today's price of 103.17. 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 year0.7%20.7%+20.0pp
    EBIT margin23.2%46.9%+23.7pp
    Discount rate6.8%4.3%-2.5pp
    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.