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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $141.35 per share(market-calibrated)

+125.4%

Upside to Fair Value

Current

$62.72

Pure Model

$152.74

Fair Value

$141.35

Bull Case

$192.94

Bear Case

$120.75

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $152.74.

What's Driving This Ratingfor EQR

↓

CapEx normalizing toward maintenance

Historical CapEx is 9.11% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$266M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 56.02% 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 2.74% revenue growth, fading to 2.50% by Year 10. Revenue reaches $4.0B (vs $3.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 93.54% indicates efficient cash generation. FCF reaches $3.2B by Year 10 (80.30% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.76

Market Risk Premium4.50%

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

Cost of Equity (Re)7.92%

Cost of Debt

Pre-tax Cost of Debt1.19%

Tax Rate5.00%

After-tax Cost of Debt1.13%

Equity Weight (E/V)73.02%

Debt Weight (D/V)26.98%

WACC Calculation

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

WACC = (73.02% × 7.92%) + (26.98% × 1.13%)

= 6.09%

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	$3.2B	$3.4B	$3.5B	$3.7B	$4.0B
EBIT	$1.8B	$1.9B	$2.0B	$2.1B	$2.3B
Tax	$89M	$95M	$99M	$105M	$113M
NOPAT	$1.7B	$1.8B	$1.9B	$2.0B	$2.1B
+ Depreciation	$950M	$1.0B	$1.1B	$1.1B	$1.2B
- Capex	$290M	$258M	$218M	$176M	$101M
- Δ NWC	$8M	$9M	$10M	$10M	$10M
Free Cash Flow	$2.3B	$2.5B	$2.7B	$2.9B	$3.2B
Discount Factor	0.943	0.838	0.744	0.661	0.554
Present Value	$2.2B	$2.1B	$2.0B	$1.9B	$1.8B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.2B

Terminal Growth Rate2.50%

WACC6.09%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$92.4B

PV of Terminal Value$51.2B

Exit Multiple Method

Year 10 EBITDA$3.5B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$76.1B

PV of Terminal Value$42.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$20.0B

PV of Terminal Value$51.2B

Enterprise Value$71.2B

(-) Net Debt$8.7B

Equity Value$62.4B

Shares Outstanding379M

Price per Share$164.65

Exit Multiple Method

PV of Projected FCFs$20.0B

PV of Terminal Value$42.1B

Enterprise Value$62.1B

(-) Net Debt$8.7B

Equity Value$53.4B

Shares Outstanding379M

Price per Share$140.83

Pure Model Fair Value

$152.74

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.09%	$214.65	$242.15	$239.55	$229.17	$219.28
5.09%	$166.98	$179.29	$196.35	$221.59	$219.28
6.09%	$137.53	$144.20	$152.74	$164.05	$179.72
7.09%	$116.82	$120.87	$125.80	$131.93	$139.78
8.09%	$101.09	$103.73	$106.85	$110.57	$115.11

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

$120.75

92.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.95

Base Case

$152.74

143.5% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.76

Bull Case

$192.94

207.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.65

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.74%

Year 3 Revenue Growth2.73%

Year 5 Revenue Growth2.86%

Year 7 Revenue Growth2.71%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin56.02%

Tax Rate5.00%

Historical Capex / Rev9.11%

Terminal Capex / Rev2.50%

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: 22x EV/EBITDA (Real Estate 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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