D.R. Horton, Inc.DHINYSE

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: $255.66 per share(market-calibrated)

+67.2%

Upside to Fair Value

Current

$152.92

Pure Model

$262.84

Fair Value

$255.66

Bull Case

$315.29

Bear Case

$211.72

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $262.84.

What's Driving This Ratingfor DHI

✓

CapEx already efficient

CapEx at 0.51% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

→

Moderate revenue growth

Analyst consensus projects -2.03% revenue growth, fading to 3.00% by Year 10. Revenue reaches $47.6B (vs $34.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $209.85/share (15.2x terminal FCF) while exit multiple gives $315.83/share (28.9x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% 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 — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 69.22% indicates efficient cash generation. FCF reaches $6.1B by Year 10 (12.75% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.45

Market Risk Premium4.50%

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

Cost of Equity (Re)11.03%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate23.61%

After-tax Cost of Debt0.00%

Equity Weight (E/V)88.66%

Debt Weight (D/V)11.34%

WACC Calculation

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

WACC = (88.66% × 11.03%) + (11.34% × 0.00%)

= 9.78%

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	$33.6B	$38.0B	$41.1B	$43.6B	$47.6B
EBIT	$6.1B	$6.9B	$7.5B	$7.9B	$8.6B
Tax	$1.4B	$1.6B	$1.8B	$1.9B	$2.0B
NOPAT	$4.7B	$5.3B	$5.7B	$6.0B	$6.6B
+ Depreciation	$85M	$97M	$104M	$111M	$121M
- Capex	$170M	$192M	$208M	$221M	$241M
- Δ NWC	-$208M	$749M	$359M	$381M	$416M
Free Cash Flow	$4.8B	$4.4B	$5.2B	$5.6B	$6.1B
Discount Factor	0.911	0.756	0.627	0.521	0.394
Present Value	$4.4B	$3.3B	$3.3B	$2.9B	$2.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.1B

Terminal Growth Rate3.00%

WACC9.78%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$92.3B

PV of Terminal Value$36.3B

Exit Multiple Method

Year 10 EBITDA$8.8B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$175.3B

PV of Terminal Value$69.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$31.5B

PV of Terminal Value$36.3B

Enterprise Value$67.8B

(-) Net Debt$3.0B

Equity Value$64.7B

Shares Outstanding309M

Price per Share$209.85

Exit Multiple Method

PV of Projected FCFs$31.5B

PV of Terminal Value$69.0B

Enterprise Value$100.5B

(-) Net Debt$3.0B

Equity Value$97.4B

Shares Outstanding309M

Price per Share$315.83

Pure Model Fair Value

$262.84

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.78%	$318.78	$327.01	$336.96	$349.24	$364.77
8.78%	$283.42	$288.84	$295.21	$302.78	$311.94
9.78%	$254.77	$258.53	$262.84	$267.83	$273.70
10.78%	$230.87	$233.57	$236.61	$240.07	$244.04
11.78%	$210.50	$212.49	$214.71	$217.19	$220.00

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

$211.72

38.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.81

Base Case

$262.84

71.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.45

Bull Case

$315.29

106.2% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.23

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-2.03%

Year 3 Revenue Growth7.04%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin18.16%

Tax Rate23.61%

Historical Capex / Rev0.51%

NWC / Revenue30.00%

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: 20x EV/EBITDA (Consumer Cyclical 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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