DTE Energy CompanyDTENYSE

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

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)

Year	Year 1	Year 3	Year 5	Year 7	Year 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 Factor	0.948	0.852	0.765	0.687	0.585
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 Estimates• Utilities 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.

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