NextEra Energy, Inc.NEENYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $131.12 per share(market-calibrated)

+41.6%

Upside to Fair Value

Current

$92.59

Pure Model

$140.35

Fair Value

$131.12

Bull Case

$190.78

Bear Case

$106.00

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.48%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $140.35.

What's Driving This Ratingfor NEE

↓

CapEx normalizing toward maintenance

Historical CapEx is 32.69% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$12.1B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 44.46% 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 13.62% in Year 1 to 1.56% 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 lower growth than model

The market implies only 0.50% perpetual growth — 150bps below the model's 2.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.55% indicates efficient cash generation. FCF reaches $21.9B by Year 10 (50.20% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.76

Market Risk Premium4.50%

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

Cost of Equity (Re)7.92%

Cost of Debt

Pre-tax Cost of Debt2.51%

Tax Rate21.00%

After-tax Cost of Debt1.98%

Equity Weight (E/V)66.92%

Debt Weight (D/V)33.08%

WACC Calculation

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

WACC = (66.92% × 7.92%) + (33.08% × 1.98%)

= 5.96%

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	$31.2B	$35.9B	$39.9B	$41.3B	$43.7B
EBIT	$13.9B	$16.0B	$17.8B	$18.4B	$19.4B
Tax	$2.9B	$3.4B	$3.7B	$3.9B	$4.1B
NOPAT	$11.0B	$12.6B	$14.0B	$14.5B	$15.3B
+ Depreciation	$6.3B	$7.3B	$8.1B	$8.4B	$8.9B
- Capex	$10.2B	$9.5B	$8.1B	$5.9B	$2.2B
- Δ NWC	$374M	$190M	$61M	$70M	$86M
Free Cash Flow	$6.7B	$10.2B	$13.9B	$16.9B	$21.9B
Discount Factor	0.944	0.841	0.749	0.667	0.561
Present Value	$6.3B	$8.6B	$10.4B	$11.3B	$12.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$21.9B

Terminal Growth Rate2.00%

WACC5.96%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$565.3B

PV of Terminal Value$316.9B

Exit Multiple Method

Year 10 EBITDA$28.3B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$452.6B

PV of Terminal Value$253.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$100.7B

PV of Terminal Value$316.9B

Enterprise Value$417.6B

(-) Net Debt$92.8B

Equity Value$324.8B

Shares Outstanding2.1B

Price per Share$155.47

Exit Multiple Method

PV of Projected FCFs$100.7B

PV of Terminal Value$253.7B

Enterprise Value$354.4B

(-) Net Debt$92.8B

Equity Value$261.6B

Shares Outstanding2.1B

Price per Share$125.23

Pure Model Fair Value

$140.35

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%
3.96%	$204.78	$230.24	$263.66	$251.04	$239.01
4.96%	$155.97	$168.38	$184.98	$208.33	$239.01
5.96%	$124.46	$131.51	$140.35	$151.74	$166.99
6.96%	$101.84	$106.25	$111.54	$118.03	$126.15
7.96%	$84.50	$87.44	$90.86	$94.91	$99.78

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

$106.00

14.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.95

Base Case

$140.35

51.6% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.76

Bull Case

$190.78

106.0% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.65

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth13.62%

Year 3 Revenue Growth5.59%

Year 5 Revenue Growth1.56%

Year 7 Revenue Growth1.73%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin44.46%

Tax Rate21.00%

Historical Capex / Rev32.69%

Terminal Capex / Rev5.00%

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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