Diamondback Energy, Inc.FANGNASDAQ

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

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $399.33 per share(market-calibrated)

+122.7%

Upside to Fair Value

Current

$179.30

Pure Model

$425.27

Fair Value

$399.33

Bull Case

$509.53

Bear Case

$371.22

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: $425.27.

What's Driving This Ratingfor FANG

↓

CapEx normalizing toward maintenance

Historical CapEx is 34.49% of revenue (heavy investment phase). Model fades this to 5.50% by Year 10, freeing up ~$5.0B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 43.60% 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 -9.59% revenue growth, fading to 2.00% by Year 10. Revenue reaches $17.1B (vs $15.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $492.37/share (26.6x terminal FCF) while exit multiple gives $358.17/share (18.0x 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 77.79% indicates efficient cash generation. FCF reaches $8.0B by Year 10 (46.60% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.58

Market Risk Premium4.50%

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

Cost of Equity (Re)7.13%

Cost of Debt

Pre-tax Cost of Debt1.48%

Tax Rate17.45%

After-tax Cost of Debt1.22%

Equity Weight (E/V)78.15%

Debt Weight (D/V)21.85%

WACC Calculation

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

WACC = (78.15% × 7.13%) + (21.85% × 1.22%)

= 5.84%

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	$13.6B	$16.2B	$16.1B	$16.3B	$17.1B
EBIT	$5.9B	$7.1B	$7.0B	$7.1B	$7.5B
Tax	$1.0B	$1.2B	$1.2B	$1.2B	$1.3B
NOPAT	$4.9B	$5.8B	$5.8B	$5.9B	$6.2B
+ Depreciation	$2.2B	$2.6B	$2.6B	$2.7B	$2.8B
- Capex	$4.7B	$4.5B	$3.5B	$2.5B	$940M
- Δ NWC	-$144M	$131M	$933,333.4	$13M	$34M
Free Cash Flow	$2.6B	$3.8B	$4.9B	$6.0B	$8.0B
Discount Factor	0.945	0.844	0.753	0.672	0.567
Present Value	$2.4B	$3.2B	$3.7B	$4.1B	$4.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$8.0B

Terminal Growth Rate2.00%

WACC5.84%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$211.8B

PV of Terminal Value$120.1B

Exit Multiple Method

Year 10 EBITDA$10.2B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$143.4B

PV of Terminal Value$81.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$36.6B

PV of Terminal Value$120.1B

Enterprise Value$156.7B

(-) Net Debt$14.4B

Equity Value$142.3B

Shares Outstanding289M

Price per Share$492.37

Exit Multiple Method

PV of Projected FCFs$36.6B

PV of Terminal Value$81.3B

Enterprise Value$117.9B

(-) Net Debt$14.4B

Equity Value$103.5B

Shares Outstanding289M

Price per Share$358.17

Pure Model Fair Value

$425.27

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%
3.84%	$599.37	$673.43	$733.52	$701.57	$671.12
4.84%	$465.21	$500.39	$547.97	$615.90	$671.12
5.84%	$380.71	$400.42	$425.27	$457.57	$501.25
6.84%	$321.07	$333.27	$347.99	$366.10	$388.93
7.84%	$275.92	$283.99	$293.43	$304.65	$318.19

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

$371.22

107.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.73

Base Case

$425.27

137.2% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.58

Bull Case

$509.53

184.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.50

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth-9.59%

Year 3 Revenue Growth8.80%

Year 5 Revenue Growth0.06%

Year 7 Revenue Growth0.83%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin43.60%

Tax Rate17.45%

Historical Capex / Rev34.49%

Terminal Capex / Rev5.50%

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: 14x EV/EBITDA (Energy 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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