Hubbell IncorporatedHUBBNYSE

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DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $525.37 per share(market-calibrated)

+1.6%

Upside to Fair Value

Current

$516.98

Pure Model

$521.43

Fair Value

$525.37

Bull Case

$627.63

Bear Case

$424.74

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

3.31%

Calibrated Growth

2.41%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $521.43.

What's Driving This Ratingfor HUBB

✓

CapEx already efficient

CapEx at 2.47% 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 30.10% 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.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 8.11% in Year 1 to 2.25% by Year 5 (per analyst consensus). 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 $516.98, the market implies 3.31% perpetual growth — 106bps above the model's 2.25%. 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 73.24% indicates efficient cash generation. FCF reaches $2.0B by Year 10 (24.22% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.00

Market Risk Premium4.50%

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

Cost of Equity (Re)9.02%

Cost of Debt

Pre-tax Cost of Debt2.14%

Tax Rate20.30%

After-tax Cost of Debt1.70%

Equity Weight (E/V)91.34%

Debt Weight (D/V)8.66%

WACC Calculation

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

WACC = (91.34% × 9.02%) + (8.66% × 1.70%)

= 8.39%

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	$6.3B	$7.0B	$7.4B	$7.7B	$8.2B
EBIT	$1.9B	$2.1B	$2.2B	$2.3B	$2.5B
Tax	$386M	$426M	$450M	$471M	$503M
NOPAT	$1.5B	$1.7B	$1.8B	$1.8B	$2.0B
+ Depreciation	$187M	$206M	$218M	$228M	$244M
- Capex	$156M	$172M	$182M	$190M	$203M
- Δ NWC	$58M	$38M	$20M	$21M	$22M
Free Cash Flow	$1.5B	$1.7B	$1.8B	$1.9B	$2.0B
Discount Factor	0.923	0.785	0.668	0.569	0.447
Present Value	$1.4B	$1.3B	$1.2B	$1.1B	$891M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.0B

Terminal Growth Rate2.25%

WACC8.39%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$33.2B

PV of Terminal Value$14.8B

Exit Multiple Method

Year 10 EBITDA$2.7B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$49.0B

PV of Terminal Value$21.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.5B

PV of Terminal Value$14.8B

Enterprise Value$26.4B

(-) Net Debt$2.1B

Equity Value$24.2B

Shares Outstanding53M

Price per Share$455.14

Exit Multiple Method

PV of Projected FCFs$11.5B

PV of Terminal Value$21.9B

Enterprise Value$33.4B

(-) Net Debt$2.1B

Equity Value$31.3B

Shares Outstanding53M

Price per Share$587.72

Pure Model Fair Value

$521.43

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
6.39%	$644.66	$667.16	$695.10	$730.72	$777.69
7.39%	$563.99	$578.23	$595.25	$615.94	$641.62
8.39%	$500.73	$510.30	$521.43	$534.54	$550.20
9.39%	$449.14	$455.86	$463.52	$472.33	$482.58
10.39%	$405.91	$410.79	$416.26	$422.45	$429.51

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

$424.74

-17.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.26

Base Case

$521.43

0.9% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.00

Bull Case

$627.63

21.4% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.85

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.11%

Year 3 Revenue Growth4.68%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin30.10%

Tax Rate20.30%

Historical Capex / Rev2.47%

NWC / Revenue12.20%

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: 18x EV/EBITDA (Industrials 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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