Duke Energy CorporationDUKNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $274.81 per share(market-calibrated)

+108.8%

Upside to Fair Value

Current

$131.63

Pure Model

$300.12

Fair Value

$274.81

Bull Case

$359.20

Bear Case

$276.77

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.48%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $300.12.

What's Driving This Ratingfor DUK

↓

CapEx normalizing toward maintenance

Historical CapEx is 28.52% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$9.8B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 35.10% 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 2.04% revenue growth, fading to 2.00% by Year 10. Revenue reaches $41.7B (vs $32.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $362.05/share (29.1x terminal FCF) while exit multiple gives $238.19/share (19.5x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 150bps below the model's 2.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 81.95% indicates efficient cash generation. FCF reaches $17.1B by Year 10 (40.97% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.51

Market Risk Premium4.50%

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

Cost of Equity (Re)6.79%

Cost of Debt

Pre-tax Cost of Debt3.23%

Tax Rate11.24%

After-tax Cost of Debt2.87%

Equity Weight (E/V)52.95%

Debt Weight (D/V)47.05%

WACC Calculation

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

WACC = (52.95% × 6.79%) + (47.05% × 2.87%)

= 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	$32.9B	$35.2B	$37.6B	$39.3B	$41.7B
EBIT	$11.5B	$12.4B	$13.2B	$13.8B	$14.6B
Tax	$1.3B	$1.4B	$1.5B	$1.5B	$1.6B
NOPAT	$10.2B	$11.0B	$11.7B	$12.2B	$13.0B
+ Depreciation	$4.9B	$5.2B	$5.6B	$5.8B	$6.2B
- Capex	$9.4B	$8.2B	$6.8B	$5.0B	$2.1B
- Δ NWC	$26M	$42M	$32M	$33M	$33M
Free Cash Flow	$5.7B	$8.0B	$10.5B	$13.0B	$17.1B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$5.4B	$6.8B	$8.0B	$8.9B	$10.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$17.1B

Terminal Growth Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$498.0B

PV of Terminal Value$291.6B

Exit Multiple Method

Year 10 EBITDA$20.9B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$333.7B

PV of Terminal Value$195.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$80.4B

PV of Terminal Value$291.6B

Enterprise Value$371.9B

(-) Net Debt$90.6B

Equity Value$281.3B

Shares Outstanding777M

Price per Share$362.05

Exit Multiple Method

PV of Projected FCFs$80.4B

PV of Terminal Value$195.3B

Enterprise Value$275.7B

(-) Net Debt$90.6B

Equity Value$185.1B

Shares Outstanding777M

Price per Share$238.19

Pure Model Fair Value

$300.12

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%	$466.77	$547.46	$520.15	$494.13	$469.32
4.50%	$335.55	$370.79	$420.12	$494.13	$469.32
5.50%	$257.00	$275.87	$300.12	$332.47	$377.75
6.50%	$203.09	$214.43	$228.30	$245.63	$267.91
7.50%	$162.96	$170.31	$179.00	$189.43	$202.18

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

$276.77

110.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.64

Base Case

$300.12

128.0% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.51

Bull Case

$359.20

172.9% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.43

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Utilities Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.04%

Year 3 Revenue Growth3.09%

Year 5 Revenue Growth2.20%

Year 7 Revenue Growth2.12%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin35.10%

Tax Rate11.24%

Historical Capex / Rev28.52%

Terminal Capex / Rev5.00%

NWC / Revenue3.99%

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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