First Solar, Inc.FSLRNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $148.54 per share(market-calibrated)

-25.7%

Upside to Fair Value

Current

$199.86

Pure Model

$143.71

Fair Value

$148.54

Bull Case

$169.42

Bear Case

$118.46

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

7.46%

Calibrated Growth

3.36%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $143.71.

What's Driving This Ratingfor FSLR

↓

CapEx normalizing toward maintenance

Historical CapEx is 20.03% of revenue (heavy investment phase). Model fades this to 5.50% by Year 10, freeing up ~$1.1B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 22.71% — below the sector mature average of 30.59%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.7B (22.71% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 1.15% in Year 1 to -3.02% 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.

🎯

Market pricing in higher long-term growth

To justify $199.86, the market implies 7.46% perpetual growth — 546bps above the model's 2.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.57% indicates efficient cash generation. FCF reaches $1.6B by Year 10 (22.35% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.63

Market Risk Premium4.50%

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

Cost of Equity (Re)11.82%

Cost of Debt

Pre-tax Cost of Debt4.87%

Tax Rate5.00%

After-tax Cost of Debt4.62%

Equity Weight (E/V)97.73%

Debt Weight (D/V)2.27%

WACC Calculation

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

WACC = (97.73% × 11.82%) + (2.27% × 4.62%)

= 11.65%

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	$5.3B	$6.7B	$7.3B	$7.1B	$7.3B
EBIT	$1.2B	$1.5B	$1.7B	$1.6B	$1.7B
Tax	$60M	$76M	$83M	$81M	$83M
NOPAT	$1.1B	$1.5B	$1.6B	$1.5B	$1.6B
+ Depreciation	$362M	$461M	$504M	$489M	$503M
- Capex	$1.1B	$1.1B	$997M	$737M	$404M
- Δ NWC	$18M	$170M	-$69M	-$22M	$43M
Free Cash Flow	$426M	$613M	$1.2B	$1.3B	$1.6B
Discount Factor	0.896	0.718	0.576	0.462	0.332
Present Value	$381M	$440M	$669M	$606M	$545M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.6B

Terminal Growth Rate2.00%

WACC11.65%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$17.3B

PV of Terminal Value$5.8B

Exit Multiple Method

Year 10 EBITDA$2.2B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$30.4B

PV of Terminal Value$10.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$5.2B

PV of Terminal Value$5.8B

Enterprise Value$10.9B

(-) Net Debt-$2.3B

Equity Value$13.2B

Shares Outstanding107M

Price per Share$123.50

Exit Multiple Method

PV of Projected FCFs$5.2B

PV of Terminal Value$10.1B

Enterprise Value$15.3B

(-) Net Debt-$2.3B

Equity Value$17.6B

Shares Outstanding107M

Price per Share$163.92

Pure Model Fair Value

$143.71

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%
9.65%	$167.24	$169.61	$172.28	$175.33	$178.83
10.65%	$153.04	$154.78	$156.72	$158.90	$161.36
11.65%	$140.95	$142.27	$143.71	$145.32	$147.11
12.65%	$130.52	$131.53	$132.63	$133.84	$135.17
13.65%	$121.42	$122.20	$123.06	$123.99	$125.00

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

$118.46

-40.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 2.03

Base Case

$143.71

-28.1% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 1.63

Bull Case

$169.42

-15.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.38

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth1.15%

Year 3 Revenue Growth9.18%

Year 5 Revenue Growth-3.02%

Year 7 Revenue Growth-1.01%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin22.71%

Terminal EBIT Margin30.59%

Tax Rate5.00%

Historical Capex / Rev20.03%

Terminal Capex / Rev5.50%

NWC / Revenue30.00%

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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