Camden Property TrustCPTNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $173.64 per share(market-calibrated)

+60.5%

Upside to Fair Value

Current

$108.19

Pure Model

$185.08

Fair Value

$173.64

Bull Case

$239.09

Bear Case

$140.02

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: $185.08.

What's Driving This Ratingfor CPT

↓

CapEx normalizing toward maintenance

Historical CapEx is 26.99% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$593M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 28.76% 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 0.26% revenue growth, fading to 2.50% by Year 10. Revenue reaches $2.4B (vs $1.6B 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 93.48% indicates efficient cash generation. FCF reaches $1.5B by Year 10 (60.52% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.83

Market Risk Premium4.50%

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

Cost of Equity (Re)8.23%

Cost of Debt

Pre-tax Cost of Debt3.14%

Tax Rate5.00%

After-tax Cost of Debt2.98%

Equity Weight (E/V)75.04%

Debt Weight (D/V)24.96%

WACC Calculation

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

WACC = (75.04% × 8.23%) + (24.96% × 2.98%)

= 6.92%

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	$1.6B	$1.5B	$1.9B	$2.2B	$2.4B
EBIT	$454M	$445M	$557M	$637M	$717M
Tax	$23M	$22M	$28M	$32M	$36M
NOPAT	$431M	$423M	$529M	$605M	$681M
+ Depreciation	$555M	$544M	$680M	$767M	$852M
- Capex	$426M	$333M	$312M	$233M	$61M
- Δ NWC	$412,278.5	-$8M	$14M	$12M	$6M
Free Cash Flow	$559M	$641M	$883M	$1.1B	$1.5B
Discount Factor	0.935	0.818	0.716	0.626	0.512
Present Value	$523M	$524M	$632M	$706M	$751M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.5B

Terminal Growth Rate2.50%

WACC6.92%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$34.0B

PV of Terminal Value$17.4B

Exit Multiple Method

Year 10 EBITDA$1.6B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$34.5B

PV of Terminal Value$17.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$6.4B

PV of Terminal Value$17.4B

Enterprise Value$23.8B

(-) Net Debt$3.9B

Equity Value$19.9B

Shares Outstanding108M

Price per Share$183.82

Exit Multiple Method

PV of Projected FCFs$6.4B

PV of Terminal Value$17.7B

Enterprise Value$24.1B

(-) Net Debt$3.9B

Equity Value$20.2B

Shares Outstanding108M

Price per Share$186.34

Pure Model Fair Value

$185.08

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%
4.92%	$252.82	$274.75	$305.72	$341.66	$326.34
5.92%	$203.54	$215.14	$230.14	$250.27	$278.71
6.92%	$169.64	$176.58	$185.08	$195.74	$209.53
7.92%	$144.31	$148.79	$154.09	$160.46	$168.28
8.92%	$124.35	$127.40	$130.92	$135.04	$139.92

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

$140.02

29.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.04

Base Case

$185.08

71.1% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.83

Bull Case

$239.09

121.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.71

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.26%

Year 3 Revenue Growth-4.66%

Year 5 Revenue Growth7.76%

Year 7 Revenue Growth5.66%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin28.76%

Terminal EBIT Margin30.00%

Tax Rate5.00%

Historical Capex / Rev26.99%

Terminal Capex / Rev2.50%

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: 22x EV/EBITDA (Real Estate 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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