Edison InternationalEIXNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $382.62 per share(market-calibrated)

+417.6%

Upside to Fair Value

Current

$73.92

Pure Model

$413.18

Fair Value

$382.62

Bull Case

$475.55

Bear Case

$392.22

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: $413.18.

What's Driving This Ratingfor EIX

↓

CapEx normalizing toward maintenance

Historical CapEx is 29.98% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$5.8B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 44.92% 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.

⚠

Analyst growth decelerates sharply

Revenue growth drops from -0.93% in Year 1 to -0.75% 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.

🎯

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 74.28% indicates efficient cash generation. FCF reaches $10.2B by Year 10 (43.99% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.83

Market Risk Premium4.50%

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

Cost of Equity (Re)8.23%

Cost of Debt

Pre-tax Cost of Debt3.34%

Tax Rate22.45%

After-tax Cost of Debt2.59%

Equity Weight (E/V)40.06%

Debt Weight (D/V)59.94%

WACC Calculation

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

WACC = (40.06% × 8.23%) + (59.94% × 2.59%)

= 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	$19.1B	$20.7B	$22.2B	$22.3B	$23.2B
EBIT	$8.6B	$9.3B	$10.0B	$10.0B	$10.4B
Tax	$1.9B	$2.1B	$2.2B	$2.2B	$2.3B
NOPAT	$6.7B	$7.2B	$7.7B	$7.8B	$8.1B
+ Depreciation	$2.7B	$3.0B	$3.2B	$3.2B	$3.3B
- Capex	$5.7B	$5.1B	$4.2B	$3.0B	$1.2B
- Δ NWC	-$13M	$75M	-$12M	$6M	$34M
Free Cash Flow	$3.7B	$5.0B	$6.7B	$8.0B	$10.2B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$3.5B	$4.3B	$5.2B	$5.5B	$6.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$10.2B

Terminal Growth Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$297.9B

PV of Terminal Value$174.4B

Exit Multiple Method

Year 10 EBITDA$13.8B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$220.2B

PV of Terminal Value$128.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$49.9B

PV of Terminal Value$174.4B

Enterprise Value$224.3B

(-) Net Debt$42.4B

Equity Value$181.8B

Shares Outstanding385M

Price per Share$472.27

Exit Multiple Method

PV of Projected FCFs$49.9B

PV of Terminal Value$128.9B

Enterprise Value$178.8B

(-) Net Debt$42.4B

Equity Value$136.3B

Shares Outstanding385M

Price per Share$354.09

Pure Model Fair Value

$413.18

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%	$618.03	$715.43	$681.46	$649.11	$618.27
4.50%	$457.69	$500.23	$559.78	$649.11	$618.27
5.50%	$361.12	$383.90	$413.18	$452.22	$506.88
6.50%	$294.46	$308.16	$324.89	$345.82	$372.71
7.50%	$244.58	$253.46	$263.95	$276.54	$291.93

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

$392.22

430.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.04

Base Case

$413.18

459.0% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.83

Bull Case

$475.55

543.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.70

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.93%

Year 3 Revenue Growth5.12%

Year 5 Revenue Growth-0.75%

Year 7 Revenue Growth0.35%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin44.92%

Tax Rate22.45%

Historical Capex / Rev29.98%

Terminal Capex / Rev5.00%

NWC / Revenue7.40%

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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