DTE Energy CompanyDTENYSE
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DCF Valuation

⚠️Model Warnings
  • Terminal value represents 87% of enterprise value. Valuation highly sensitive to long-term assumptions.
DCF Valuation Summary
Hold
Fair Value: $146.75 per share(market-calibrated)
-0.6%
Upside to Fair Value
Current
$147.65
Pure Model
$150.46
Fair Value
$146.75
Bull Case
$173.80
Bear Case
$150.78
Market Reality Check
Model Terminal Growth
2.00%
Market-Implied Growth
1.38%
Calibrated Growth
1.91%
Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $150.46.
What's Driving This Ratingfor DTE
CapEx normalizing toward maintenance
Historical CapEx is 25.27% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$3.2B in annual FCF. This is the biggest driver of long-term cash flow improvement.
Margin expansion modeled
Current EBIT margin is 13.60% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.8B (17.90% margin).
Analyst growth decelerates sharply
Revenue growth drops from -4.94% in Year 1 to -2.25% by Year 5 (per analyst consensus). That's below the 2.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.
Perpetuity and exit methods disagree
Perpetuity growth gives $190.72/share (29.1x terminal FCF) while exit multiple gives $110.19/share (20.7x terminal FCF). The base case averages both methods.
Model and market roughly agree
Market-implied terminal growth of 1.38% is close to the model's 2.00% (only 62bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 77.48% indicates efficient cash generation. FCF reaches $3.4B by Year 10 (21.14% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.48
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)6.68%
Cost of Debt
Pre-tax Cost of Debt3.09%
Tax Rate5.68%
After-tax Cost of Debt2.92%
Equity Weight (E/V)53.54%
Debt Weight (D/V)46.46%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (53.54% × 6.68%) + (46.46% × 2.92%)
= 5.50%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
YearYear 1Year 3Year 5Year 7Year 10
Revenue$15.0B$16.0B$15.6B$15.3B$15.9B
EBIT$2.0B$2.2B$2.1B$2.4B$2.8B
Tax$116M$124M$121M$138M$161M
NOPAT$1.9B$2.1B$2.0B$2.3B$2.7B
+ Depreciation$1.4B$1.5B$1.5B$1.4B$1.5B
- Capex$3.8B$3.3B$2.5B$1.8B$793M
- Δ NWC-$52M$18M-$24M-$6M$21M
Free Cash Flow-$408M$213M$954M$1.9B$3.4B
Discount Factor0.9480.8520.7650.6870.585
Present Value-$387M$181M$730M$1.3B$2.0B
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$3.4B
Terminal Growth Rate2.00%
WACC5.50%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$97.7B
PV of Terminal Value$57.2B
Exit Multiple Method
Year 10 EBITDA$4.3B
Exit Multiple (EV/EBITDA)16.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$69.3B
PV of Terminal Value$40.5B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$8.5B
PV of Terminal Value$57.2B
Enterprise Value$65.8B
(-) Net Debt$26.3B
Equity Value$39.5B
Shares Outstanding207M
Price per Share$190.72
Exit Multiple Method
PV of Projected FCFs$8.5B
PV of Terminal Value$40.5B
Enterprise Value$49.1B
(-) Net Debt$26.3B
Equity Value$22.8B
Shares Outstanding207M
Price per Share$110.19
Pure Model Fair Value
$150.46
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%$271.83$331.26$311.49$292.66$274.73
4.50%$175.87$201.83$238.16$292.66$274.73
5.50%$118.69$132.59$150.46$174.28$207.63
6.50%$79.65$88.01$98.22$110.98$127.40
7.50%$50.74$56.16$62.56$70.24$79.63
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
$150.78
2.1% vs current
  • -25% vs analyst consensus
  • Terminal growth: 2.0%
  • Beta: 0.60
Base Case
$150.46
1.9% vs current
  • Analyst consensus
  • Terminal growth: 2.0%
  • Beta: 0.48
Bull Case
$173.80
17.7% vs current
  • +25% vs analyst consensus
  • Terminal growth: 2.5%
  • Beta: 0.41
Key Assumptions & Drivers✓ Using Analyst Consensus EstimatesUtilities Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-4.94%
Year 3 Revenue Growth1.75%
Year 5 Revenue Growth-2.25%
Year 7 Revenue Growth-0.55%
Year 10 Revenue Growth2.00%
Terminal Growth Rate2.00%
Margin & Efficiency
Current EBIT Margin13.60%
Terminal EBIT Margin20.00%
Tax Rate5.68%
Historical Capex / Rev25.27%
Terminal Capex / Rev5.00%
NWC / Revenue6.62%
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.