Devon Energy CorporationDVNNYSE

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: $260.64 per share(market-calibrated)

+479.8%

Upside to Fair Value

Current

$44.95

Pure Model

$273.91

Fair Value

$260.64

Bull Case

$357.94

Bear Case

$214.39

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: $273.91.

What's Driving This Ratingfor DVN

↓

CapEx normalizing toward maintenance

Historical CapEx is 25.84% of revenue (heavy investment phase). Model fades this to 5.50% by Year 10, freeing up ~$7.1B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 29.24% 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 -11.72% revenue growth, fading to 2.00% by Year 10. Revenue reaches $34.8B (vs $17.1B today).

🎯

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 73.79% indicates efficient cash generation. FCF reaches $12.1B by Year 10 (34.69% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.63

Market Risk Premium4.50%

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

Cost of Equity (Re)7.31%

Cost of Debt

Pre-tax Cost of Debt4.52%

Tax Rate22.65%

After-tax Cost of Debt3.49%

Equity Weight (E/V)76.27%

Debt Weight (D/V)23.73%

WACC Calculation

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

WACC = (76.27% × 7.31%) + (23.73% × 3.49%)

= 6.41%

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	$15.1B	$21.4B	$22.4B	$29.5B	$34.8B
EBIT	$4.4B	$6.3B	$6.6B	$8.6B	$10.2B
Tax	$1.0B	$1.4B	$1.5B	$2.0B	$2.3B
NOPAT	$3.4B	$4.9B	$5.1B	$6.7B	$7.9B
+ Depreciation	$2.7B	$3.8B	$4.0B	$5.2B	$6.2B
- Capex	$3.9B	$4.6B	$3.8B	$3.6B	$1.9B
- Δ NWC	-$201M	$300M	$378M	$339M	$68M
Free Cash Flow	$2.4B	$3.8B	$4.9B	$8.0B	$12.1B
Discount Factor	0.940	0.830	0.733	0.647	0.537
Present Value	$2.3B	$3.1B	$3.6B	$5.2B	$6.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$12.1B

Terminal Growth Rate2.00%

WACC6.41%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$279.2B

PV of Terminal Value$150.1B

Exit Multiple Method

Year 10 EBITDA$16.3B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$228.8B

PV of Terminal Value$123.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$42.8B

PV of Terminal Value$150.1B

Enterprise Value$192.9B

(-) Net Debt$7.3B

Equity Value$185.6B

Shares Outstanding628M

Price per Share$295.47

Exit Multiple Method

PV of Projected FCFs$42.8B

PV of Terminal Value$123.0B

Enterprise Value$165.8B

(-) Net Debt$7.3B

Equity Value$158.5B

Shares Outstanding628M

Price per Share$252.35

Pure Model Fair Value

$273.91

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%
4.41%	$368.94	$401.85	$448.43	$499.32	$478.17
5.41%	$298.48	$315.85	$338.32	$368.52	$411.28
6.41%	$250.85	$261.21	$273.91	$289.87	$310.50
7.41%	$215.80	$222.47	$230.38	$239.89	$251.57
8.41%	$188.54	$193.08	$198.33	$204.47	$211.74

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

$214.39

376.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.78

Base Case

$273.91

509.4% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.63

Bull Case

$357.94

696.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.53

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth-11.72%

Year 3 Revenue Growth16.28%

Year 5 Revenue Growth20.29%

Year 7 Revenue Growth12.98%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin29.24%

Tax Rate22.65%

Historical Capex / Rev25.84%

Terminal Capex / Rev5.50%

NWC / Revenue10.00%

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: 14x EV/EBITDA (Energy 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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