Quanta Services, Inc.PWRNYSE

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

DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $488.48 per share(market-calibrated)

-14.7%

Upside to Fair Value

Current

$572.66

Pure Model

$479.17

Fair Value

$488.48

Bull Case

$659.14

Bear Case

$337.67

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

5.63%

Calibrated Growth

2.76%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $479.17.

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 $359.02/share (13.9x terminal FCF) while exit multiple gives $599.33/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 $572.66, the market implies 5.63% perpetual growth — 338bps 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)1.13

Market Risk Premium4.50%

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

Cost of Equity (Re)9.60%

Cost of Debt

Pre-tax Cost of Debt14.21%

Tax Rate26.18%

After-tax Cost of Debt10.49%

Equity Weight (E/V)98.65%

Debt Weight (D/V)1.35%

WACC Calculation

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

WACC = (98.65% × 9.60%) + (1.35% × 10.49%)

= 9.61%

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	0.912	0.759	0.632	0.526	0.399
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%

WACC9.61%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$89.1B

PV of Terminal Value$35.6B

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$72.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$19.6B

PV of Terminal Value$35.6B

Enterprise Value$55.2B

(-) Net Debt$748M

Equity Value$54.5B

Shares Outstanding152M

Price per Share$359.02

Exit Multiple Method

PV of Projected FCFs$19.6B

PV of Terminal Value$72.1B

Enterprise Value$91.7B

(-) Net Debt$748M

Equity Value$90.9B

Shares Outstanding152M

Price per Share$599.33

Pure Model Fair Value

$479.17

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%
7.61%	$587.20	$601.87	$619.26	$640.24	$666.03
8.61%	$519.51	$529.47	$541.00	$554.49	$570.50
9.61%	$464.12	$471.17	$479.17	$488.35	$498.96
10.61%	$417.66	$422.81	$428.57	$435.06	$442.44
11.61%	$377.98	$381.83	$386.10	$390.84	$396.16

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

$337.67

-41.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.42

Base Case

$479.17

-16.3% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.13

Bull Case

$659.14

15.1% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.96

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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