Consolidated Edison, Inc.EDNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $245.15 per share(market-calibrated)

+117.2%

Upside to Fair Value

Current

$112.89

Pure Model

$265.56

Fair Value

$245.15

Bull Case

$311.80

Bear Case

$247.83

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: $265.56.

What's Driving This Ratingfor ED

↓

CapEx normalizing toward maintenance

Historical CapEx is 26.19% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$4.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 28.68% 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 2.33% revenue growth, fading to 2.00% by Year 10. Revenue reaches $21.5B (vs $16.9B 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 71.88% indicates efficient cash generation. FCF reaches $6.3B by Year 10 (29.51% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.34

Market Risk Premium4.50%

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

Cost of Equity (Re)6.05%

Cost of Debt

Pre-tax Cost of Debt3.70%

Tax Rate22.10%

After-tax Cost of Debt2.88%

Equity Weight (E/V)58.39%

Debt Weight (D/V)41.61%

WACC Calculation

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

WACC = (58.39% × 6.05%) + (41.61% × 2.88%)

= 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	$17.3B	$18.7B	$19.4B	$20.2B	$21.5B
EBIT	$5.0B	$5.4B	$5.6B	$5.8B	$6.2B
Tax	$1.1B	$1.2B	$1.2B	$1.3B	$1.4B
NOPAT	$3.9B	$4.2B	$4.3B	$4.5B	$4.8B
+ Depreciation	$2.1B	$2.3B	$2.4B	$2.5B	$2.7B
- Capex	$4.5B	$4.0B	$3.2B	$2.4B	$1.1B
- Δ NWC	$41M	$67M	$45M	$45M	$44M
Free Cash Flow	$1.4B	$2.4B	$3.4B	$4.5B	$6.3B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$1.4B	$2.0B	$2.6B	$3.1B	$3.7B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.3B

Terminal Growth Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$184.7B

PV of Terminal Value$108.1B

Exit Multiple Method

Year 10 EBITDA$8.8B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$141.1B

PV of Terminal Value$82.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$26.7B

PV of Terminal Value$108.1B

Enterprise Value$134.8B

(-) Net Debt$27.1B

Equity Value$107.7B

Shares Outstanding357M

Price per Share$301.29

Exit Multiple Method

PV of Projected FCFs$26.7B

PV of Terminal Value$82.6B

Enterprise Value$109.3B

(-) Net Debt$27.1B

Equity Value$82.1B

Shares Outstanding357M

Price per Share$229.83

Pure Model Fair Value

$265.56

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%	$402.30	$467.36	$444.69	$423.10	$402.53
4.50%	$295.24	$323.65	$363.43	$423.10	$402.53
5.50%	$230.79	$246.00	$265.56	$291.64	$328.15
6.50%	$186.33	$195.48	$206.66	$220.63	$238.60
7.50%	$153.10	$159.03	$166.03	$174.44	$184.72

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

$247.83

119.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.43

Base Case

$265.56

135.2% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.34

Bull Case

$311.80

176.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.30

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.33%

Year 3 Revenue Growth3.51%

Year 5 Revenue Growth2.23%

Year 7 Revenue Growth2.14%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin28.68%

Tax Rate22.10%

Historical Capex / Rev26.19%

Terminal Capex / Rev5.00%

NWC / Revenue10.51%

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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