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)
| 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.