GE Vernova Inc.GEVNYSE
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DCF Valuation
DCF Valuation Summary
Sell
Fair Value: $690.78 per share(market-calibrated)
-18.0%
Upside to Fair Value
Current
$842.00
Pure Model
$679.20
Fair Value
$690.78
Bull Case
$894.51
Bear Case
$505.11
Market Reality Check
Model Terminal Growth
2.00%
Market-Implied Growth
6.02%
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 $842.00, the market implies 6.02% perpetual growth — 402bps 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
6.2% 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.