First Solar, Inc.FSLRNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $147.34 per share(market-calibrated)

-25.4%

Upside to Fair Value

Current

$197.46

Pure Model

$142.59

Fair Value

$147.34

Bull Case

$168.13

Bear Case

$117.45

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

7.51%

Calibrated Growth

3.38%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $142.59.

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 $197.46, the market implies 7.51% perpetual growth — 551bps 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)1.65

Market Risk Premium4.50%

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

Cost of Equity (Re)11.92%

Cost of Debt

Pre-tax Cost of Debt4.87%

Tax Rate5.00%

After-tax Cost of Debt4.62%

Equity Weight (E/V)97.70%

Debt Weight (D/V)2.30%

WACC Calculation

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

WACC = (97.70% × 11.92%) + (2.30% × 4.62%)

= 11.75%

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	0.895	0.717	0.574	0.460	0.329
Present Value	$381M	$439M	$666M	$602M	$540M

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%

WACC11.75%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$17.2B

PV of Terminal Value$5.7B

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$10.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$5.2B

PV of Terminal Value$5.7B

Enterprise Value$10.8B

(-) Net Debt-$2.3B

Equity Value$13.1B

Shares Outstanding107M

Price per Share$122.29

Exit Multiple Method

PV of Projected FCFs$5.2B

PV of Terminal Value$10.0B

Enterprise Value$15.2B

(-) Net Debt-$2.3B

Equity Value$17.5B

Shares Outstanding107M

Price per Share$162.89

Pure Model Fair Value

$142.59

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%
9.75%	$165.79	$168.08	$170.67	$173.62	$177.00
10.75%	$151.81	$153.51	$155.39	$157.51	$159.89
11.75%	$139.90	$141.18	$142.59	$144.15	$145.89
12.75%	$129.61	$130.59	$131.66	$132.84	$134.14
13.75%	$120.62	$121.38	$122.22	$123.12	$124.12

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

$117.45

-40.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 2.06

Base Case

$142.59

-27.8% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 1.65

Bull Case

$168.13

-14.9% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.40

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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