Regions Financial CorporationRFNYSE

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

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $38.89 per share(market-calibrated)

+39.0%

Upside to Fair Value

Current

$27.97

Pure Model

$39.29

Fair Value

$38.89

Bull Case

$41.38

Bear Case

$36.57

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

2.00%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $39.29.

What's Driving This Ratingfor RF

✓

CapEx already efficient

CapEx at 1.38% 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 33.86% 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 -17.91% revenue growth, fading to 2.50% by Year 10. Revenue reaches $10.3B (vs $9.6B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.59% indicates efficient cash generation. FCF reaches $2.8B by Year 10 (27.46% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.03

Market Risk Premium4.50%

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

Cost of Equity (Re)9.12%

Cost of Debt

Pre-tax Cost of Debt26.34%

Tax Rate21.40%

After-tax Cost of Debt20.70%

Equity Weight (E/V)83.36%

Debt Weight (D/V)16.64%

WACC Calculation

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

WACC = (83.36% × 9.12%) + (16.64% × 20.70%)

= 11.05%

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	$7.9B	$8.6B	$9.1B	$9.5B	$10.3B
EBIT	$2.7B	$2.9B	$3.1B	$3.2B	$3.5B
Tax	$571M	$620M	$658M	$692M	$745M
NOPAT	$2.1B	$2.3B	$2.4B	$2.5B	$2.7B
+ Depreciation	$195M	$212M	$225M	$236M	$254M
- Capex	$109M	$118M	$125M	$132M	$142M
- Δ NWC	-$172M	$38M	$22M	$23M	$25M
Free Cash Flow	$2.4B	$2.3B	$2.5B	$2.6B	$2.8B
Discount Factor	0.901	0.730	0.592	0.480	0.351
Present Value	$2.1B	$1.7B	$1.5B	$1.3B	$990M

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.8B

Terminal Growth Rate2.50%

WACC11.05%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$33.9B

PV of Terminal Value$11.9B

Exit Multiple Method

Year 10 EBITDA$3.7B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$44.8B

PV of Terminal Value$15.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$14.6B

PV of Terminal Value$11.9B

Enterprise Value$26.4B

(-) Net Debt-$6.0B

Equity Value$32.5B

Shares Outstanding875M

Price per Share$37.09

Exit Multiple Method

PV of Projected FCFs$14.6B

PV of Terminal Value$15.7B

Enterprise Value$30.3B

(-) Net Debt-$6.0B

Equity Value$36.3B

Shares Outstanding875M

Price per Share$41.49

Pure Model Fair Value

$39.29

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
9.05%	$44.98	$45.67	$46.47	$47.41	$48.51
10.05%	$41.46	$41.96	$42.52	$43.16	$43.90
11.05%	$38.52	$38.89	$39.29	$39.75	$40.27
12.05%	$36.01	$36.29	$36.59	$36.92	$37.30
13.05%	$33.84	$34.05	$34.28	$34.53	$34.81

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

$36.57

30.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.28

Base Case

$39.29

40.5% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.03

Bull Case

$41.38

47.9% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.87

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-17.91%

Year 3 Revenue Growth4.61%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin33.86%

Tax Rate21.40%

Historical Capex / Rev1.38%

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: 12x EV/EBITDA (Financial Services 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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