Evergy, Inc.EVRGNASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Buy
Fair Value: $144.74 per share(market-calibrated)
+77.6%
Upside to Fair Value
Current
$81.51
Pure Model
$158.91
Fair Value
$144.74
Bull Case
$199.34
Bear Case
$124.45
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: $158.91.
What's Driving This Ratingfor EVRG
↓
CapEx normalizing toward maintenance
Historical CapEx is 35.61% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$2.5B in annual FCF. This is the biggest driver of long-term cash flow improvement.
↑
Margin expansion modeled
Current EBIT margin is 23.27% — below the sector mature average of 24.80%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.9B (23.27% margin).
⚠
Analyst growth decelerates sharply
Revenue growth drops from 7.45% in Year 1 to 2.00% 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 $195.49/share (28.9x terminal FCF) while exit multiple gives $122.33/share (18.9x terminal FCF). The base case averages both methods.
🎯
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 84.65% indicates efficient cash generation. FCF reaches $2.9B by Year 10 (34.75% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.64
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)7.40%
Cost of Debt
Pre-tax Cost of Debt3.20%
Tax Rate5.00%
After-tax Cost of Debt3.04%
Equity Weight (E/V)57.16%
Debt Weight (D/V)42.84%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (57.16% × 7.40%) + (42.84% × 3.04%)
= 5.53%
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 | $6.3B | $6.9B | $7.5B | $7.8B | $8.3B |
| EBIT | $1.5B | $1.6B | $1.8B | $1.8B | $1.9B |
| Tax | $73M | $80M | $88M | $91M | $97M |
| NOPAT | $1.4B | $1.5B | $1.7B | $1.7B | $1.8B |
| + Depreciation | $1.1B | $1.2B | $1.3B | $1.4B | $1.5B |
| - Capex | $2.2B | $2.0B | $1.7B | $1.2B | $416M |
| - Δ NWC | $31M | $26M | $11M | $11M | $12M |
| Free Cash Flow | $237M | $738M | $1.3B | $1.9B | $2.9B |
| Discount Factor | 0.948 | 0.851 | 0.764 | 0.686 | 0.584 |
| Present Value | $224M | $628M | $1.0B | $1.3B | $1.7B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$2.9B
Terminal Growth Rate2.00%
WACC5.53%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$83.5B
PV of Terminal Value$48.7B
Exit Multiple Method
Year 10 EBITDA$3.4B
Exit Multiple (EV/EBITDA)16.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$54.6B
PV of Terminal Value$31.9B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$10.3B
PV of Terminal Value$48.7B
Enterprise Value$59.1B
(-) Net Debt$14.0B
Equity Value$45.0B
Shares Outstanding230M
Price per Share$195.49
Exit Multiple Method
PV of Projected FCFs$10.3B
PV of Terminal Value$31.9B
Enterprise Value$42.2B
(-) Net Debt$14.0B
Equity Value$28.2B
Shares Outstanding230M
Price per Share$122.33
Pure Model Fair Value
$158.91
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% |
|---|---|---|---|---|---|
| 3.53% | $250.98 | $295.66 | $284.80 | $270.33 | $256.54 |
| 4.53% | $178.27 | $197.94 | $225.39 | $266.37 | $256.54 |
| 5.53% | $134.75 | $145.33 | $158.91 | $176.97 | $202.17 |
| 6.53% | $104.97 | $111.35 | $119.13 | $128.85 | $141.33 |
| 7.53% | $82.87 | $87.02 | $91.91 | $97.77 | $104.93 |
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
$124.45
52.7% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 0.81
Base Case
$158.91
95.0% vs current
- • Analyst consensus
- • Terminal growth: 2.0%
- • Beta: 0.64
Bull Case
$199.34
144.6% vs current
- • +25% vs analyst consensus
- • Terminal growth: 2.5%
- • Beta: 0.55
Key Assumptions & Drivers• Utilities Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth7.45%
Year 3 Revenue Growth5.65%
Year 5 Revenue Growth2.00%
Year 7 Revenue Growth2.00%
Year 10 Revenue Growth2.00%
Terminal Growth Rate2.00%
Margin & Efficiency
Current EBIT Margin23.27%
Terminal EBIT Margin24.80%
Tax Rate5.00%
Historical Capex / Rev35.61%
Terminal Capex / Rev5.00%
NWC / Revenue7.13%
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.