PulteGroup, Inc.PHMNYSE

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $228.48 per share(market-calibrated)

+60.8%

Upside to Fair Value

Current

$142.10

Pure Model

$234.81

Fair Value

$228.48

Bull Case

$278.04

Bear Case

$192.18

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $234.81.

What's Driving This Ratingfor PHM

✓

CapEx already efficient

CapEx at 0.60% 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 20.08% 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.

→

Moderate revenue growth

Analyst consensus projects -5.01% revenue growth, fading to 3.00% by Year 10. Revenue reaches $23.5B (vs $17.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $189.82/share (15.3x terminal FCF) while exit multiple gives $279.81/share (28.7x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 69.61% indicates efficient cash generation. FCF reaches $3.4B by Year 10 (14.32% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.34

Market Risk Premium4.50%

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

Cost of Equity (Re)10.54%

Cost of Debt

Pre-tax Cost of Debt0.02%

Tax Rate23.79%

After-tax Cost of Debt0.01%

Equity Weight (E/V)92.13%

Debt Weight (D/V)7.87%

WACC Calculation

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

WACC = (92.13% × 10.54%) + (7.87% × 0.01%)

= 9.71%

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	$16.4B	$18.6B	$20.3B	$21.5B	$23.5B
EBIT	$3.3B	$3.7B	$4.1B	$4.3B	$4.7B
Tax	$785M	$890M	$968M	$1.0B	$1.1B
NOPAT	$2.5B	$2.9B	$3.1B	$3.3B	$3.6B
+ Depreciation	$80M	$91M	$99M	$105M	$115M
- Capex	$99M	$112M	$121M	$129M	$141M
- Δ NWC	-$260M	$419M	$177M	$188M	$205M
Free Cash Flow	$2.8B	$2.4B	$2.9B	$3.1B	$3.4B
Discount Factor	0.911	0.757	0.629	0.523	0.396
Present Value	$2.5B	$1.8B	$1.8B	$1.6B	$1.3B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.4B

Terminal Growth Rate3.00%

WACC9.71%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$51.6B

PV of Terminal Value$20.4B

Exit Multiple Method

Year 10 EBITDA$4.8B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$96.6B

PV of Terminal Value$38.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.6B

PV of Terminal Value$20.4B

Enterprise Value$38.0B

(-) Net Debt$394M

Equity Value$37.6B

Shares Outstanding198M

Price per Share$189.82

Exit Multiple Method

PV of Projected FCFs$17.6B

PV of Terminal Value$38.2B

Enterprise Value$55.8B

(-) Net Debt$394M

Equity Value$55.4B

Shares Outstanding198M

Price per Share$279.81

Pure Model Fair Value

$234.81

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.71%	$283.57	$290.87	$299.71	$310.66	$324.55
8.71%	$252.67	$257.46	$263.10	$269.81	$277.95
9.71%	$227.70	$231.01	$234.81	$239.23	$244.42
10.71%	$206.90	$209.27	$211.95	$215.00	$218.51
11.71%	$189.19	$190.94	$192.89	$195.08	$197.55

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

$192.18

35.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.68

Base Case

$234.81

65.2% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.34

Bull Case

$278.04

95.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.14

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-5.01%

Year 3 Revenue Growth8.10%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin20.08%

Tax Rate23.79%

Historical Capex / Rev0.60%

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: 20x EV/EBITDA (Consumer Cyclical 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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