GE Vernova Inc.GEVNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $690.76 per share(market-calibrated)

-17.9%

Upside to Fair Value

Current

$841.27

Pure Model

$679.20

Fair Value

$690.76

Bull Case

$894.51

Bear Case

$505.11

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

6.01%

Calibrated Growth

2.60%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $679.20.

What's Driving This Ratingfor GEV

✓

CapEx already efficient

CapEx at 2.10% 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 22.11% 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.

↑

Strong near-term revenue growth

Analyst consensus projects 16.69% revenue growth in Year 1, fading to 9.88% by Year 5 and 2.00% by Year 10. Revenue reaches $92.0B by Year 10 (vs $38.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $566.26/share (12.2x terminal FCF) while exit multiple gives $792.14/share (22.2x terminal FCF). The 16x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $841.27, the market implies 6.01% perpetual growth — 401bps 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 72.05% indicates efficient cash generation. FCF reaches $16.5B by Year 10 (17.88% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.30

Market Risk Premium4.50%

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

Cost of Equity (Re)10.36%

Cost of Debt

Pre-tax Cost of Debt5.00%

Tax Rate21.00%

After-tax Cost of Debt3.95%

Equity Weight (E/V)100.00%

Debt Weight (D/V)0.00%

WACC Calculation

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

WACC = (100.00% × 10.36%) + (0.00% × 3.95%)

= 10.36%

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	$44.4B	$57.4B	$71.7B	$82.8B	$92.0B
EBIT	$9.8B	$12.7B	$15.8B	$18.3B	$20.3B
Tax	$2.1B	$2.7B	$3.3B	$3.8B	$4.3B
NOPAT	$7.8B	$10.0B	$12.5B	$14.5B	$16.1B
+ Depreciation	$1.2B	$1.6B	$1.9B	$2.2B	$2.5B
- Capex	$932M	$1.2B	$1.5B	$1.7B	$1.9B
- Δ NWC	$635M	$697M	$644M	$522M	$180M
Free Cash Flow	$7.4B	$9.7B	$12.3B	$14.5B	$16.5B
Discount Factor	0.906	0.744	0.611	0.502	0.373
Present Value	$6.7B	$7.2B	$7.5B	$7.3B	$6.1B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$16.5B

Terminal Growth Rate2.00%

WACC10.36%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$200.8B

PV of Terminal Value$74.9B

Exit Multiple Method

Year 10 EBITDA$22.8B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$365.4B

PV of Terminal Value$136.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$70.2B

PV of Terminal Value$74.9B

Enterprise Value$145.2B

(-) Net Debt-$8.8B

Equity Value$154.0B

Shares Outstanding272M

Price per Share$566.26

Exit Multiple Method

PV of Projected FCFs$70.2B

PV of Terminal Value$136.4B

Enterprise Value$206.6B

(-) Net Debt-$8.8B

Equity Value$215.5B

Shares Outstanding272M

Price per Share$792.14

Pure Model Fair Value

$679.20

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%
8.36%	$805.14	$819.69	$836.53	$856.25	$879.64
9.36%	$727.91	$738.21	$749.90	$763.30	$778.81
10.36%	$663.27	$670.79	$679.20	$688.68	$699.46
11.36%	$608.12	$613.75	$619.97	$626.90	$634.66
12.36%	$560.40	$564.69	$569.40	$574.59	$580.34

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

$505.11

-40.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.63

Base Case

$679.20

-19.3% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 1.30

Bull Case

$894.51

6.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.11

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth16.69%

Year 3 Revenue Growth13.82%

Year 5 Revenue Growth9.88%

Year 7 Revenue Growth6.73%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin22.11%

Tax Rate21.00%

Historical Capex / Rev2.10%

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: 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.

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