Ameriprise Financial, Inc.AMPNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $853.69 per share(market-calibrated)

+83.3%

Upside to Fair Value

Current

$465.68

Pure Model

$875.05

Fair Value

$853.69

Bull Case

$1,034.27

Bear Case

$723.91

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $875.05.

What's Driving This Ratingfor AMP

✓

CapEx already efficient

CapEx at 0.70% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 34.12% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 3.05% revenue growth, fading to 2.50% by Year 10. Revenue reaches $26.8B (vs $18.9B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 74.64% indicates efficient cash generation. FCF reaches $6.7B by Year 10 (25.19% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.25

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.13%

Cost of Debt

Pre-tax Cost of Debt4.66%

Tax Rate20.89%

After-tax Cost of Debt3.69%

Equity Weight (E/V)88.28%

Debt Weight (D/V)11.72%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (88.28% × 10.13%) + (11.72% × 3.69%)

= 9.37%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$19.5B	$21.4B	$23.7B	$24.9B	$26.8B
EBIT	$6.6B	$7.3B	$8.1B	$8.5B	$9.1B
Tax	$1.4B	$1.5B	$1.7B	$1.8B	$1.9B
NOPAT	$5.3B	$5.8B	$6.4B	$6.7B	$7.2B
+ Depreciation	-$72M	-$79M	-$87M	-$92M	-$99M
- Capex	$136M	$150M	$166M	$174M	$188M
- Δ NWC	$173M	$317M	$173M	$182M	$196M
Free Cash Flow	$4.9B	$5.2B	$6.0B	$6.3B	$6.7B
Discount Factor	0.914	0.764	0.639	0.534	0.408
Present Value	$4.5B	$4.0B	$3.8B	$3.3B	$2.8B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.7B

Terminal Growth Rate2.50%

WACC9.37%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$100.6B

PV of Terminal Value$41.1B

Exit Multiple Method

Year 10 EBITDA$9.0B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$108.5B

PV of Terminal Value$44.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$36.0B

PV of Terminal Value$41.1B

Enterprise Value$77.1B

(-) Net Debt-$4.2B

Equity Value$81.3B

Shares Outstanding95M

Price per Share$858.09

Exit Multiple Method

PV of Projected FCFs$36.0B

PV of Terminal Value$44.3B

Enterprise Value$80.3B

(-) Net Debt-$4.2B

Equity Value$84.6B

Shares Outstanding95M

Price per Share$892.01

Pure Model Fair Value

$875.05

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
7.37%	$1,045.61	$1,075.32	$1,111.12	$1,155.11	$1,210.46
8.37%	$934.34	$954.03	$977.07	$1,004.40	$1,037.34
9.37%	$845.70	$859.38	$875.05	$893.18	$914.39
10.37%	$772.76	$782.61	$793.71	$806.32	$820.75
11.37%	$711.33	$718.62	$726.73	$735.81	$746.04

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$723.91

55.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.56

Base Case

$875.05

87.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.25

Bull Case

$1,034.27

122.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 1.06

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.05%

Year 3 Revenue Growth5.18%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin34.12%

Tax Rate20.89%

Historical Capex / Rev0.70%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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