CenterPoint Energy, Inc.CNPNYSE

Overview Intelligence Charts News Fundamentals

DCF Valuation

⚠️Model Warnings

•Terminal value represents 87% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $83.90 per share(market-calibrated)

+93.1%

Upside to Fair Value

Current

$43.44

Pure Model

$92.52

Fair Value

$83.90

Bull Case

$116.44

Bear Case

$81.56

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.48%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $92.52.

What's Driving This Ratingfor CNP

↓

CapEx normalizing toward maintenance

Historical CapEx is 45.67% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$5.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 30.98% 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 4.76% revenue growth, fading to 2.00% by Year 10. Revenue reaches $13.7B (vs $9.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $111.35/share (29.1x terminal FCF) while exit multiple gives $73.69/share (20.6x terminal FCF). 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 77.84% indicates efficient cash generation. FCF reaches $4.9B by Year 10 (35.72% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.54

Market Risk Premium4.50%

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

Cost of Equity (Re)6.93%

Cost of Debt

Pre-tax Cost of Debt2.95%

Tax Rate15.64%

After-tax Cost of Debt2.49%

Equity Weight (E/V)54.52%

Debt Weight (D/V)45.48%

WACC Calculation

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

WACC = (54.52% × 6.93%) + (45.48% × 2.49%)

= 5.50%

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	$9.8B	$10.8B	$12.0B	$12.8B	$13.7B
EBIT	$3.0B	$3.3B	$3.7B	$4.0B	$4.2B
Tax	$475M	$522M	$584M	$620M	$663M
NOPAT	$2.6B	$2.8B	$3.1B	$3.3B	$3.6B
+ Depreciation	$1.5B	$1.6B	$1.8B	$1.9B	$2.0B
- Capex	$4.5B	$3.9B	$3.3B	$2.4B	$685M
- Δ NWC	$73M	$81M	$66M	$59M	$44M
Free Cash Flow	-$527M	$394M	$1.6B	$2.8B	$4.9B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	-$500M	$336M	$1.2B	$1.9B	$2.9B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.9B

Terminal Growth Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$142.5B

PV of Terminal Value$83.4B

Exit Multiple Method

Year 10 EBITDA$6.3B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$100.5B

PV of Terminal Value$58.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.9B

PV of Terminal Value$83.4B

Enterprise Value$96.3B

(-) Net Debt$23.6B

Equity Value$72.7B

Shares Outstanding653M

Price per Share$111.35

Exit Multiple Method

PV of Projected FCFs$12.9B

PV of Terminal Value$58.8B

Enterprise Value$71.7B

(-) Net Debt$23.6B

Equity Value$48.1B

Shares Outstanding653M

Price per Share$73.69

Pure Model Fair Value

$92.52

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%
3.50%	$148.62	$176.09	$166.96	$158.26	$149.97
4.50%	$104.27	$116.26	$133.06	$158.26	$149.97
5.50%	$77.84	$84.26	$92.52	$103.53	$118.95
6.50%	$59.79	$63.65	$68.37	$74.27	$81.86
7.50%	$46.43	$48.93	$51.89	$55.44	$59.78

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

$81.56

87.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.67

Base Case

$92.52

113.0% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.54

Bull Case

$116.44

168.0% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.46

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.76%

Year 3 Revenue Growth4.78%

Year 5 Revenue Growth3.47%

Year 7 Revenue Growth2.88%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin30.98%

Tax Rate15.64%

Historical Capex / Rev45.67%

Terminal Capex / Rev5.00%

NWC / Revenue16.44%

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.

Explore More

S&P 500 Screener

Filter and sort all 500 stocks

Market Movers

Today's biggest gainers and losers

Market Heatmap

Visual sector performance