Capital One Financial CorporationCOFNYSE

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

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $292.92 per share(market-calibrated)

+39.6%

Upside to Fair Value

Current

$209.88

Pure Model

$295.58

Fair Value

$292.92

Bull Case

$322.57

Bear Case

$264.79

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

2.00%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $295.58.

What's Driving This Ratingfor COF

✓

CapEx already efficient

CapEx at 1.30% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 21.35% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $22.7B (26.60% margin).

→

Moderate revenue growth

Analyst consensus projects -8.19% revenue growth, fading to 2.50% by Year 10. Revenue reaches $85.4B (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 77.30% indicates efficient cash generation. FCF reaches $20.7B by Year 10 (24.28% 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 Debt27.99%

Tax Rate21.00%

After-tax Cost of Debt22.11%

Equity Weight (E/V)71.36%

Debt Weight (D/V)28.64%

WACC Calculation

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

WACC = (71.36% × 9.56%) + (28.64% × 22.11%)

= 13.15%

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	$79.3B	$85.4B
EBIT	$13.6B	$15.1B	$17.9B	$20.1B	$22.7B
Tax	$2.8B	$3.2B	$3.8B	$4.2B	$4.8B
NOPAT	$10.7B	$11.9B	$14.2B	$15.8B	$18.0B
+ Depreciation	$3.1B	$3.4B	$3.6B	$3.8B	$4.1B
- Capex	$828M	$921M	$983M	$1.0B	$1.1B
- Δ NWC	-$567M	$384M	$184M	$194M	$208M
Free Cash Flow	$13.5B	$14.0B	$16.6B	$18.4B	$20.7B
Discount Factor	0.884	0.690	0.539	0.421	0.291
Present Value	$11.9B	$9.7B	$9.0B	$7.8B	$6.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$20.7B

Terminal Growth Rate2.50%

WACC13.15%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$199.6B

PV of Terminal Value$58.0B

Exit Multiple Method

Year 10 EBITDA$26.8B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$322.1B

PV of Terminal Value$93.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$86.3B

PV of Terminal Value$58.0B

Enterprise Value$144.3B

(-) Net Debt$2.3B

Equity Value$142.0B

Shares Outstanding541M

Price per Share$262.66

Exit Multiple Method

PV of Projected FCFs$86.3B

PV of Terminal Value$93.6B

Enterprise Value$179.9B

(-) Net Debt$2.3B

Equity Value$177.6B

Shares Outstanding541M

Price per Share$328.49

Pure Model Fair Value

$295.58

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%
11.15%	$343.80	$347.99	$352.67	$357.92	$363.85
12.15%	$315.22	$318.38	$321.86	$325.73	$330.04
13.15%	$290.49	$292.92	$295.58	$298.49	$301.71
14.15%	$268.87	$270.76	$272.82	$275.06	$277.51
15.15%	$249.77	$251.27	$252.89	$254.64	$256.54

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

$264.79

26.2% vs current

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

Base Case

$295.58

40.8% vs current

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

Bull Case

$322.57

53.7% 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 Growth5.75%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin21.35%

Terminal EBIT Margin28.00%

Tax Rate21.00%

Historical Capex / Rev1.30%

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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