Eversource EnergyESNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $69.44 per share(market-calibrated)

-6.7%

Upside to Fair Value

Current

$74.42

Pure Model

$71.02

Fair Value

$69.44

Bull Case

$81.41

Bear Case

$66.31

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

1.50%

Calibrated Growth

1.93%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $71.02.

What's Driving This Ratingfor ES

↓

CapEx normalizing toward maintenance

Historical CapEx is 28.93% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$3.1B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 17.85% — below the sector mature average of 22.06%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.5B (19.30% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from -4.22% in Year 1 to -6.88% 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.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $93.31/share (29.1x terminal FCF) while exit multiple gives $48.74/share (20.3x terminal FCF). The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 1.50% is close to the model's 2.00% (only 50bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 78.97% indicates efficient cash generation. FCF reaches $3.2B by Year 10 (24.53% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.79

Market Risk Premium4.50%

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

Cost of Equity (Re)8.06%

Cost of Debt

Pre-tax Cost of Debt2.95%

Tax Rate7.62%

After-tax Cost of Debt2.73%

Equity Weight (E/V)47.68%

Debt Weight (D/V)52.32%

WACC Calculation

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

WACC = (47.68% × 8.06%) + (52.32% × 2.73%)

= 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	$13.0B	$14.1B	$14.0B	$12.9B	$13.0B
EBIT	$2.3B	$2.5B	$2.5B	$2.4B	$2.5B
Tax	$177M	$192M	$191M	$183M	$191M
NOPAT	$2.1B	$2.3B	$2.3B	$2.2B	$2.3B
+ Depreciation	$1.5B	$1.7B	$1.7B	$1.5B	$1.5B
- Capex	$3.8B	$3.3B	$2.6B	$1.7B	$648M
- Δ NWC	-$18M	$8M	-$34M	-$14M	$8M
Free Cash Flow	-$67M	$650M	$1.4B	$2.1B	$3.2B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	-$64M	$554M	$1.1B	$1.4B	$1.9B

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 Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$92.6B

PV of Terminal Value$54.2B

Exit Multiple Method

Year 10 EBITDA$4.0B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$64.4B

PV of Terminal Value$37.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.5B

PV of Terminal Value$54.2B

Enterprise Value$64.8B

(-) Net Debt$30.1B

Equity Value$34.6B

Shares Outstanding371M

Price per Share$93.31

Exit Multiple Method

PV of Projected FCFs$10.5B

PV of Terminal Value$37.7B

Enterprise Value$48.2B

(-) Net Debt$30.1B

Equity Value$18.1B

Shares Outstanding371M

Price per Share$48.74

Pure Model Fair Value

$71.02

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%	$135.56	$167.01	$156.47	$146.43	$136.87
4.50%	$84.63	$98.36	$117.59	$146.43	$136.87
5.50%	$54.22	$61.57	$71.02	$83.63	$101.28
6.50%	$33.41	$37.83	$43.23	$49.99	$58.67
7.50%	$17.97	$20.83	$24.22	$28.28	$33.25

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

$66.31

-10.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.99

Base Case

$71.02

-4.6% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.79

Bull Case

$81.41

9.4% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.67

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth-4.22%

Year 3 Revenue Growth1.67%

Year 5 Revenue Growth-6.88%

Year 7 Revenue Growth-3.33%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin17.85%

Terminal EBIT Margin22.06%

Tax Rate7.62%

Historical Capex / Rev28.93%

Terminal Capex / Rev5.00%

NWC / Revenue3.23%

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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