EMCOR Group, Inc.EMENYSE

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

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $606.17 per share(market-calibrated)

-17.6%

Upside to Fair Value

Current

$735.78

Pure Model

$586.77

Fair Value

$606.17

Bull Case

$704.09

Bear Case

$476.00

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.75%

Calibrated Growth

3.13%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $586.77.

What's Driving This Ratingfor EME

✓

CapEx already efficient

CapEx at 0.41% 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 7.56% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.9B (11.86% margin).

→

Moderate revenue growth

Analyst consensus projects 6.29% revenue growth, fading to 2.25% by Year 10. Revenue reaches $24.2B (vs $17.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $471.75/share (14.1x terminal FCF) while exit multiple gives $701.78/share (26.4x 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 $735.78, the market implies 5.75% perpetual growth — 350bps 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 68.17% indicates efficient cash generation. FCF reaches $2.1B by Year 10 (8.61% 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 Debt0.95%

Tax Rate30.00%

After-tax Cost of Debt0.67%

Equity Weight (E/V)97.52%

Debt Weight (D/V)2.48%

WACC Calculation

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

WACC = (97.52% × 9.72%) + (2.48% × 0.67%)

= 9.50%

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	$18.1B	$20.4B	$21.7B	$22.7B	$24.2B
EBIT	$1.4B	$1.5B	$2.1B	$2.4B	$2.9B
Tax	$410M	$464M	$619M	$733M	$862M
NOPAT	$956M	$1.1B	$1.4B	$1.7B	$2.0B
+ Depreciation	$140M	$159M	$168M	$176M	$188M
- Capex	$75M	$85M	$90M	$94M	$100M
- Δ NWC	$25M	$23M	$11M	$11M	$12M
Free Cash Flow	$997M	$1.1B	$1.5B	$1.8B	$2.1B
Discount Factor	0.913	0.762	0.635	0.530	0.404
Present Value	$911M	$863M	$961M	$943M	$842M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.1B

Terminal Growth Rate2.25%

WACC9.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$29.4B

PV of Terminal Value$11.9B

Exit Multiple Method

Year 10 EBITDA$3.1B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$55.1B

PV of Terminal Value$22.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$9.1B

PV of Terminal Value$11.9B

Enterprise Value$21.0B

(-) Net Debt-$268M

Equity Value$21.3B

Shares Outstanding45M

Price per Share$471.75

Exit Multiple Method

PV of Projected FCFs$9.1B

PV of Terminal Value$22.2B

Enterprise Value$31.3B

(-) Net Debt-$268M

Equity Value$31.6B

Shares Outstanding45M

Price per Share$701.78

Pure Model Fair Value

$586.77

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%
7.50%	$708.79	$725.60	$745.62	$769.86	$799.80
8.50%	$632.23	$643.60	$656.78	$672.25	$690.67
9.50%	$569.65	$577.66	$586.77	$597.23	$609.36
10.50%	$517.14	$522.97	$529.50	$536.88	$545.28
11.50%	$472.25	$476.61	$481.43	$486.80	$492.83

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

$476.00

-35.3% vs current

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

Base Case

$586.77

-20.3% vs current

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

Bull Case

$704.09

-4.3% 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 Growth6.29%

Year 3 Revenue Growth5.25%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin7.56%

Terminal EBIT Margin13.00%

Tax Rate30.00%

Historical Capex / Rev0.41%

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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