Capital One Financial CorporationCOFNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $411.74 per share(market-calibrated)

+111.9%

Upside to Fair Value

Current

$194.32

Pure Model

$422.56

Fair Value

$411.74

Bull Case

$489.77

Bear Case

$354.57

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: $422.56.

What's Driving This Ratingfor COF

↓

CapEx normalizing toward maintenance

Historical CapEx is 1.55% of revenue (heavy investment phase). Model fades this to 1.50% by Year 10, freeing up ~$45M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 19.98% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $22.5B (26.32% margin).

→

Moderate revenue growth

Analyst consensus projects -8.19% revenue growth, fading to 2.50% by Year 10. Revenue reaches $85.5B (vs $69.3B 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 77.02% indicates efficient cash generation. FCF reaches $20.8B by Year 10 (24.37% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.12

Market Risk Premium4.50%

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

Cost of Equity (Re)9.56%

Cost of Debt

Pre-tax Cost of Debt5.00%

Tax Rate21.00%

After-tax Cost of Debt3.95%

Equity Weight (E/V)100.00%

Debt Weight (D/V)0.00%

WACC Calculation

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

WACC = (100.00% × 9.56%) + (0.00% × 3.95%)

= 9.56%

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	$63.6B	$70.8B	$75.5B	$79.4B	$85.5B
EBIT	$12.7B	$14.1B	$17.3B	$19.6B	$22.5B
Tax	$2.7B	$3.0B	$3.6B	$4.1B	$4.7B
NOPAT	$10.0B	$11.2B	$13.6B	$15.5B	$17.8B
+ Depreciation	$3.4B	$3.8B	$4.0B	$4.2B	$4.5B
- Capex	$987M	$1.1B	$1.2B	$1.2B	$1.3B
- Δ NWC	-$567M	$389M	$184M	$194M	$208M
Free Cash Flow	$13.0B	$13.5B	$16.3B	$18.3B	$20.8B
Discount Factor	0.913	0.760	0.634	0.528	0.401
Present Value	$11.9B	$10.2B	$10.3B	$9.7B	$8.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$20.8B

Terminal Growth Rate2.50%

WACC9.56%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$302.4B

PV of Terminal Value$121.4B

Exit Multiple Method

Year 10 EBITDA$27.0B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$324.5B

PV of Terminal Value$130.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$99.6B

PV of Terminal Value$121.4B

Enterprise Value$221.0B

(-) Net Debt-$3.0B

Equity Value$224.1B

Shares Outstanding541M

Price per Share$414.38

Exit Multiple Method

PV of Projected FCFs$99.6B

PV of Terminal Value$130.2B

Enterprise Value$229.9B

(-) Net Debt-$3.0B

Equity Value$232.9B

Shares Outstanding541M

Price per Share$430.74

Pure Model Fair Value

$422.56

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%
7.56%	$509.34	$524.18	$541.96	$563.64	$590.66
8.56%	$452.84	$462.78	$474.35	$488.01	$504.37
9.56%	$407.67	$414.63	$422.56	$431.71	$442.37
10.56%	$370.43	$375.47	$381.12	$387.53	$394.84
11.56%	$339.03	$342.78	$346.93	$351.57	$356.79

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

$354.57

82.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.41

Base Case

$422.56

117.5% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.12

Bull Case

$489.77

152.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.96

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-8.19%

Year 3 Revenue Growth5.81%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin19.98%

Terminal EBIT Margin28.00%

Tax Rate21.00%

Historical Capex / Rev1.55%

Terminal Capex / Rev1.50%

NWC / Revenue10.00%

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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