Extra Space Storage Inc.EXRNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $166.36 per share(market-calibrated)

+11.6%

Upside to Fair Value

Current

$149.09

Pure Model

$166.77

Fair Value

$166.36

Bull Case

$220.71

Bear Case

$119.81

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

2.31%

Calibrated Growth

2.47%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $166.77.

What's Driving This Ratingfor EXR

✓

CapEx already efficient

CapEx at 0.50% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 50.58% 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 2.44% revenue growth, fading to 2.50% by Year 10. Revenue reaches $5.1B (vs $3.4B today).

✓

Model and market roughly agree

Market-implied terminal growth of 2.31% is close to the model's 2.50% (only 19bps 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 94.51% indicates efficient cash generation. FCF reaches $3.2B by Year 10 (61.99% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.24

Market Risk Premium4.50%

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

Cost of Equity (Re)10.09%

Cost of Debt

Pre-tax Cost of Debt2.74%

Tax Rate5.00%

After-tax Cost of Debt2.61%

Equity Weight (E/V)67.84%

Debt Weight (D/V)32.16%

WACC Calculation

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

WACC = (67.84% × 10.09%) + (32.16% × 2.61%)

= 7.68%

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	$3.5B	$3.8B	$4.3B	$4.7B	$5.1B
EBIT	$1.7B	$1.9B	$2.2B	$2.4B	$2.6B
Tax	$87M	$95M	$110M	$118M	$129M
NOPAT	$1.7B	$1.8B	$2.1B	$2.2B	$2.4B
+ Depreciation	$519M	$565M	$651M	$702M	$765M
- Capex	$17M	$19M	$22M	$23M	$25M
- Δ NWC	$19M	$44M	$43M	$39M	$29M
Free Cash Flow	$2.1B	$2.3B	$2.7B	$2.9B	$3.2B
Discount Factor	0.929	0.801	0.691	0.596	0.477
Present Value	$2.0B	$1.9B	$1.8B	$1.7B	$1.5B

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%

WACC7.68%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$62.5B

PV of Terminal Value$29.8B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$73.6B

PV of Terminal Value$35.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.7B

PV of Terminal Value$29.8B

Enterprise Value$47.5B

(-) Net Debt$14.8B

Equity Value$32.7B

Shares Outstanding212M

Price per Share$154.32

Exit Multiple Method

PV of Projected FCFs$17.7B

PV of Terminal Value$35.1B

Enterprise Value$52.8B

(-) Net Debt$14.8B

Equity Value$38.0B

Shares Outstanding212M

Price per Share$179.22

Pure Model Fair Value

$166.77

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%
5.68%	$226.44	$241.16	$260.51	$287.08	$325.81
6.68%	$185.24	$193.83	$204.46	$217.99	$235.77
7.68%	$154.81	$160.26	$166.77	$174.66	$184.44
8.68%	$130.98	$134.65	$138.92	$143.93	$149.92
9.68%	$111.57	$114.15	$117.09	$120.48	$124.40

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

$119.81

-19.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.55

Base Case

$166.77

11.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.24

Bull Case

$220.71

48.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 1.06

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.44%

Year 3 Revenue Growth5.22%

Year 5 Revenue Growth4.45%

Year 7 Revenue Growth3.67%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin50.58%

Tax Rate5.00%

Historical Capex / Rev0.50%

NWC / Revenue23.41%

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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