Constellation Energy CorporationCEGNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $461.28 per share(market-calibrated)

+41.0%

Upside to Fair Value

Current

$327.12

Pure Model

$467.51

Fair Value

$461.28

Bull Case

$576.38

Bear Case

$372.39

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.63%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $467.51.

What's Driving This Ratingfor CEG

↓

CapEx normalizing toward maintenance

Historical CapEx is 8.58% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$1.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 30.82% 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.

↑

Strong near-term revenue growth

Analyst consensus projects 14.79% revenue growth in Year 1, fading to 6.83% by Year 5 and 2.00% by Year 10. Revenue reaches $41.8B by Year 10 (vs $25.5B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $391.55/share (14.6x terminal FCF) while exit multiple gives $543.46/share (24.4x terminal FCF). The 16x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 150bps below the model's 2.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 65.60% indicates efficient cash generation. FCF reaches $11.5B by Year 10 (27.54% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.11

Market Risk Premium4.50%

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

Cost of Equity (Re)9.48%

Cost of Debt

Pre-tax Cost of Debt4.44%

Tax Rate30.00%

After-tax Cost of Debt3.11%

Equity Weight (E/V)91.93%

Debt Weight (D/V)8.07%

WACC Calculation

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

WACC = (91.93% × 9.48%) + (8.07% × 3.11%)

= 8.97%

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	$29.3B	$32.8B	$34.5B	$38.3B	$41.8B
EBIT	$9.0B	$10.1B	$10.6B	$11.8B	$12.9B
Tax	$2.7B	$3.0B	$3.2B	$3.5B	$3.9B
NOPAT	$6.3B	$7.1B	$7.4B	$8.3B	$9.0B
+ Depreciation	$3.3B	$3.7B	$3.8B	$4.3B	$4.7B
- Capex	$2.5B	$2.6B	$2.4B	$2.4B	$2.1B
- Δ NWC	$371M	$200M	$217M	$176M	$81M
Free Cash Flow	$6.7B	$8.0B	$8.7B	$10.0B	$11.5B
Discount Factor	0.918	0.773	0.651	0.548	0.424
Present Value	$6.2B	$6.2B	$5.6B	$5.5B	$4.9B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$11.5B

Terminal Growth Rate2.00%

WACC8.97%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$168.5B

PV of Terminal Value$71.4B

Exit Multiple Method

Year 10 EBITDA$17.5B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$280.7B

PV of Terminal Value$118.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$56.4B

PV of Terminal Value$71.4B

Enterprise Value$127.8B

(-) Net Debt$5.2B

Equity Value$122.6B

Shares Outstanding313M

Price per Share$391.55

Exit Multiple Method

PV of Projected FCFs$56.4B

PV of Terminal Value$118.9B

Enterprise Value$175.3B

(-) Net Debt$5.2B

Equity Value$170.1B

Shares Outstanding313M

Price per Share$543.46

Pure Model Fair Value

$467.51

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.00%	1.50%	2.00%	2.50%	3.00%
6.97%	$569.62	$584.99	$603.45	$626.05	$654.35
7.97%	$504.70	$514.94	$526.89	$541.02	$558.01
8.97%	$452.21	$459.35	$467.51	$476.93	$487.92
9.97%	$408.52	$413.67	$419.47	$426.04	$433.55
10.97%	$371.39	$375.21	$379.45	$384.20	$389.54

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

$372.39

13.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.38

Base Case

$467.51

42.9% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 1.11

Bull Case

$576.38

76.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.94

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Utilities Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth14.79%

Year 3 Revenue Growth6.62%

Year 5 Revenue Growth6.83%

Year 7 Revenue Growth4.90%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin30.82%

Tax Rate30.00%

Historical Capex / Rev8.58%

Terminal Capex / Rev5.00%

NWC / Revenue9.82%

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: 16x EV/EBITDA (Utilities 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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