Truist Financial CorporationTFCNYSE
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DCF Valuation
DCF Valuation Summary
Sell
Fair Value: $37.21 per share(market-calibrated)
-24.9%
Upside to Fair Value
Current
$49.55
Pure Model
$36.17
Fair Value
$37.21
Bull Case
$36.96
Bear Case
$34.12
Market Reality Check
Model Terminal Growth
2.50%
Market-Implied Growth
3.55%
Calibrated Growth
2.76%
Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $36.17.
What's Driving This Ratingfor TFC
✓
CapEx already efficient
CapEx at 0.66% 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 16.40% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $7.0B (25.57% margin).
→
Moderate revenue growth
Analyst consensus projects -29.80% revenue growth, fading to 2.50% by Year 10. Revenue reaches $27.4B (vs $30.4B today).
🎯
Market pricing in higher long-term growth
To justify $49.55, the market implies 3.55% perpetual growth — 105bps above the model's 2.50%. 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 82.30% indicates efficient cash generation. FCF reaches $6.5B by Year 10 (23.72% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)0.86
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)8.37%
Cost of Debt
Pre-tax Cost of Debt9.77%
Tax Rate16.41%
After-tax Cost of Debt8.17%
Equity Weight (E/V)47.36%
Debt Weight (D/V)52.64%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (47.36% × 8.37%) + (52.64% × 8.17%)
= 8.27%
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 | $21.4B | $23.0B | $24.2B | $25.5B | $27.4B |
| EBIT | $3.5B | $3.8B | $5.0B | $5.9B | $7.0B |
| Tax | $575M | $619M | $818M | $972M | $1.2B |
| NOPAT | $2.9B | $3.2B | $4.2B | $4.9B | $5.9B |
| + Depreciation | $694M | $747M | $787M | $827M | $891M |
| - Capex | $141M | $152M | $160M | $168M | $181M |
| - Δ NWC | -$907M | $71M | $59M | $62M | $67M |
| Free Cash Flow | $4.4B | $3.7B | $4.7B | $5.5B | $6.5B |
| Discount Factor | 0.924 | 0.788 | 0.672 | 0.574 | 0.452 |
| Present Value | $4.1B | $2.9B | $3.2B | $3.2B | $2.9B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$6.5B
Terminal Growth Rate2.50%
WACC8.27%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$115.6B
PV of Terminal Value$52.2B
Exit Multiple Method
Year 10 EBITDA$7.9B
Exit Multiple (EV/EBITDA)12.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$94.8B
PV of Terminal Value$42.8B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$31.7B
PV of Terminal Value$52.2B
Enterprise Value$84.0B
(-) Net Debt$33.4B
Equity Value$50.5B
Shares Outstanding1.3B
Price per Share$39.87
Exit Multiple Method
PV of Projected FCFs$31.7B
PV of Terminal Value$42.8B
Enterprise Value$74.6B
(-) Net Debt$33.4B
Equity Value$41.1B
Shares Outstanding1.3B
Price per Share$32.47
Pure Model Fair Value
$36.17
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% |
|---|---|---|---|---|---|
| 6.27% | $51.45 | $55.10 | $59.72 | $65.75 | $73.96 |
| 7.27% | $40.89 | $43.13 | $45.85 | $49.20 | $53.45 |
| 8.27% | $32.95 | $34.43 | $36.17 | $38.24 | $40.74 |
| 9.27% | $26.70 | $27.73 | $28.90 | $30.26 | $31.86 |
| 10.27% | $21.60 | $22.34 | $23.17 | $24.11 | $25.19 |
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
$34.12
-31.1% vs current
- • -25% vs analyst consensus
- • Terminal growth: 2.0%
- • Beta: 1.08
Base Case
$36.17
-27.0% vs current
- • Analyst consensus
- • Terminal growth: 2.5%
- • Beta: 0.86
Bull Case
$36.96
-25.4% vs current
- • +25% vs analyst consensus
- • Terminal growth: 3.0%
- • Beta: 0.73
Key Assumptions & Drivers• Financial Services Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth-29.80%
Year 3 Revenue Growth3.18%
Year 5 Revenue Growth2.50%
Year 7 Revenue Growth2.50%
Year 10 Revenue Growth2.50%
Terminal Growth Rate2.50%
Margin & Efficiency
Current EBIT Margin16.40%
Terminal EBIT Margin28.00%
Tax Rate16.41%
Historical Capex / Rev0.66%
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.