Steel Dynamics, Inc.STLDNASDAQ

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DCF Valuation

DCF Valuation Summary

Buy

Fair Value: $227.51 per share(market-calibrated)

+17.3%

Upside to Fair Value

Current

$193.91

Pure Model

$226.98

Fair Value

$227.51

Bull Case

$279.74

Bear Case

$177.66

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

2.66%

Calibrated Growth

2.31%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $226.98.

What's Driving This Ratingfor STLD

↓

CapEx normalizing toward maintenance

Historical CapEx is 7.03% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$820M in annual FCF. This is the biggest driver of long-term cash flow improvement.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 15.48% in Year 1 to 2.25% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $186.54/share (14.0x terminal FCF) while exit multiple gives $267.42/share (23.7x terminal FCF). The 14x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 2.66% is close to the model's 2.25% (only 41bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

→

Moderate cash flow conversion

Year 10 FCF/EBITDA conversion is 59.13% — acceptable but leaves room for improvement. High reinvestment needs consume a meaningful portion of operating cash flow.

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.40

Market Risk Premium4.50%

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

Cost of Equity (Re)10.78%

Cost of Debt

Pre-tax Cost of Debt1.67%

Tax Rate20.47%

After-tax Cost of Debt1.33%

Equity Weight (E/V)87.19%

Debt Weight (D/V)12.81%

WACC Calculation

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

WACC = (87.19% × 10.78%) + (12.81% × 1.33%)

= 9.57%

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	$21.0B	$22.4B	$24.2B	$25.3B	$27.1B
EBIT	$3.5B	$3.8B	$4.1B	$4.2B	$4.5B
Tax	$721M	$769M	$832M	$870M	$930M
NOPAT	$2.8B	$3.0B	$3.2B	$3.4B	$3.6B
+ Depreciation	$508M	$542M	$586M	$613M	$655M
- Capex	$1.5B	$1.4B	$1.4B	$1.3B	$1.1B
- Δ NWC	$526M	$153M	$100M	$104M	$111M
Free Cash Flow	$1.3B	$2.0B	$2.3B	$2.6B	$3.1B
Discount Factor	0.913	0.760	0.633	0.528	0.401
Present Value	$1.2B	$1.5B	$1.5B	$1.4B	$1.2B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.1B

Terminal Growth Rate2.25%

WACC9.57%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$42.9B

PV of Terminal Value$17.2B

Exit Multiple Method

Year 10 EBITDA$5.2B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$72.8B

PV of Terminal Value$29.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$13.8B

PV of Terminal Value$17.2B

Enterprise Value$31.0B

(-) Net Debt$3.4B

Equity Value$27.6B

Shares Outstanding148M

Price per Share$186.54

Exit Multiple Method

PV of Projected FCFs$13.8B

PV of Terminal Value$29.2B

Enterprise Value$43.0B

(-) Net Debt$3.4B

Equity Value$39.5B

Shares Outstanding148M

Price per Share$267.42

Pure Model Fair Value

$226.98

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%
7.57%	$278.95	$286.28	$295.00	$305.52	$318.49
8.57%	$246.21	$251.18	$256.94	$263.69	$271.71
9.57%	$219.48	$222.99	$226.98	$231.56	$236.86
10.57%	$197.07	$199.64	$202.51	$205.74	$209.42
11.57%	$177.94	$179.86	$181.98	$184.34	$186.99

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

$177.66

-8.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.74

Base Case

$226.98

17.1% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.40

Bull Case

$279.74

44.3% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.19

Key Assumptions & Drivers• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth15.48%

Year 3 Revenue Growth3.79%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin16.78%

Tax Rate20.47%

Historical Capex / Rev7.03%

Terminal Capex / Rev4.00%

NWC / Revenue18.70%

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: 14x EV/EBITDA (Basic Materials 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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