EMCOR Group, Inc.EMENYSE

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $612.94 per share(market-calibrated)

-21.7%

Upside to Fair Value

Current

$783.06

Pure Model

$591.76

Fair Value

$612.94

Bull Case

$743.23

Bear Case

$458.20

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

6.04%

Calibrated Growth

3.20%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $591.76.

What's Driving This Ratingfor EME

✓

CapEx already efficient

CapEx at 0.39% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 6.02% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.0B (11.54% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 22.31% in Year 1 to 2.25% by Year 5 (per analyst consensus). 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 $480.23/share (13.8x terminal FCF) while exit multiple gives $703.29/share (25.3x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $783.06, the market implies 6.04% perpetual growth — 379bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 71.25% indicates efficient cash generation. FCF reaches $2.3B by Year 10 (8.79% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.16

Market Risk Premium4.50%

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

Cost of Equity (Re)9.72%

Cost of Debt

Pre-tax Cost of Debt2.82%

Tax Rate26.88%

After-tax Cost of Debt2.06%

Equity Weight (E/V)99.05%

Debt Weight (D/V)0.95%

WACC Calculation

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

WACC = (99.05% × 9.72%) + (0.95% × 2.06%)

= 9.65%

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	$17.8B	$21.2B	$23.2B	$24.3B	$26.0B
EBIT	$1.1B	$1.3B	$2.0B	$2.5B	$3.0B
Tax	$288M	$343M	$533M	$662M	$805M
NOPAT	$784M	$934M	$1.4B	$1.8B	$2.2B
+ Depreciation	$142M	$169M	$185M	$194M	$207M
- Capex	$70M	$84M	$92M	$96M	$102M
- Δ NWC	$75M	$52M	$12M	$12M	$13M
Free Cash Flow	$781M	$968M	$1.5B	$1.9B	$2.3B
Discount Factor	0.912	0.758	0.631	0.525	0.398
Present Value	$713M	$734M	$966M	$990M	$908M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.3B

Terminal Growth Rate2.25%

WACC9.65%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$31.5B

PV of Terminal Value$12.5B

Exit Multiple Method

Year 10 EBITDA$3.2B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$57.7B

PV of Terminal Value$22.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.8B

PV of Terminal Value$12.5B

Enterprise Value$21.4B

(-) Net Debt-$991M

Equity Value$22.4B

Shares Outstanding47M

Price per Share$480.23

Exit Multiple Method

PV of Projected FCFs$8.8B

PV of Terminal Value$22.9B

Enterprise Value$31.8B

(-) Net Debt-$991M

Equity Value$32.8B

Shares Outstanding47M

Price per Share$703.29

Pure Model Fair Value

$591.76

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
7.65%	$713.68	$730.37	$750.14	$773.95	$803.16
8.65%	$637.21	$648.56	$661.69	$677.04	$695.24
9.65%	$574.58	$582.63	$591.76	$602.22	$614.30
10.65%	$522.00	$527.88	$534.47	$541.88	$550.30
11.65%	$477.05	$481.46	$486.34	$491.76	$497.83

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

$458.20

-41.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.45

Base Case

$591.76

-24.4% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.16

Bull Case

$743.23

-5.1% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.99

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth22.31%

Year 3 Revenue Growth11.88%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin6.02%

Terminal EBIT Margin13.00%

Tax Rate26.88%

Historical Capex / Rev0.39%

NWC / Revenue2.29%

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: 18x EV/EBITDA (Industrials 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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