Quanta Services, Inc.PWRNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $494.20 per share(market-calibrated)

-12.7%

Upside to Fair Value

Current

$566.00

Pure Model

$485.15

Fair Value

$494.20

Bull Case

$667.09

Bear Case

$342.34

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.42%

Calibrated Growth

2.73%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $485.15.

What's Driving This Ratingfor PWR

✓

CapEx already efficient

CapEx at 1.74% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 7.01% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $8.3B (11.04% margin).

↑

Strong near-term revenue growth

Analyst consensus projects 17.90% revenue growth in Year 1, fading to 13.65% by Year 5 and 2.25% by Year 10. Revenue reaches $74.9B by Year 10 (vs $28.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $365.56/share (14.1x terminal FCF) while exit multiple gives $604.74/share (28.1x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $566.00, the market implies 5.42% perpetual growth — 317bps 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 64.03% indicates efficient cash generation. FCF reaches $6.4B by Year 10 (8.57% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.11

Market Risk Premium4.50%

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

Cost of Equity (Re)9.49%

Cost of Debt

Pre-tax Cost of Debt14.21%

Tax Rate26.18%

After-tax Cost of Debt10.49%

Equity Weight (E/V)98.64%

Debt Weight (D/V)1.36%

WACC Calculation

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

WACC = (98.64% × 9.49%) + (1.36% × 10.49%)

= 9.50%

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	$33.4B	$42.3B	$54.0B	$65.6B	$74.9B
EBIT	$2.3B	$3.0B	$3.8B	$6.0B	$8.3B
Tax	$614M	$776M	$991M	$1.6B	$2.2B
NOPAT	$1.7B	$2.2B	$2.8B	$4.4B	$6.1B
+ Depreciation	$786M	$994M	$1.3B	$1.5B	$1.8B
- Capex	$581M	$735M	$938M	$1.1B	$1.3B
- Δ NWC	$434M	$397M	$555M	$467M	$141M
Free Cash Flow	$1.5B	$2.1B	$2.6B	$4.4B	$6.4B
Discount Factor	0.913	0.762	0.635	0.530	0.403
Present Value	$1.4B	$1.6B	$1.6B	$2.3B	$2.6B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.4B

Terminal Growth Rate2.25%

WACC9.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$90.5B

PV of Terminal Value$36.5B

Exit Multiple Method

Year 10 EBITDA$10.0B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$180.4B

PV of Terminal Value$72.8B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$19.7B

PV of Terminal Value$36.5B

Enterprise Value$56.2B

(-) Net Debt$748M

Equity Value$55.4B

Shares Outstanding152M

Price per Share$365.56

Exit Multiple Method

PV of Projected FCFs$19.7B

PV of Terminal Value$72.8B

Enterprise Value$92.5B

(-) Net Debt$748M

Equity Value$91.7B

Shares Outstanding152M

Price per Share$604.74

Pure Model Fair Value

$485.15

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%
7.50%	$595.33	$610.66	$628.90	$650.97	$678.24
8.50%	$526.06	$536.41	$548.42	$562.52	$579.30
9.50%	$469.55	$476.84	$485.15	$494.68	$505.74
10.50%	$422.25	$427.56	$433.52	$440.25	$447.90
11.50%	$381.93	$385.90	$390.29	$395.19	$400.69

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

$342.34

-39.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.39

Base Case

$485.15

-14.3% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.11

Bull Case

$667.09

17.9% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.94

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth17.90%

Year 3 Revenue Growth12.34%

Year 5 Revenue Growth13.65%

Year 7 Revenue Growth9.09%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin7.01%

Terminal EBIT Margin13.00%

Tax Rate26.18%

Historical Capex / Rev1.74%

NWC / Revenue8.56%

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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