Truist Financial CorporationTFCNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $37.19 per share(market-calibrated)

-24.6%

Upside to Fair Value

Current

$49.30

Pure Model

$36.17

Fair Value

$37.19

Bull Case

$36.96

Bear Case

$34.13

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

3.53%

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 $49.30, the market implies 3.53% perpetual growth — 103bps 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)47.23%

Debt Weight (D/V)52.77%

WACC Calculation

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

WACC = (47.23% × 8.37%) + (52.77% × 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$39.88

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$41.2B

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	$65.76	$73.97
7.27%	$40.89	$43.13	$45.85	$49.21	$53.45
8.27%	$32.96	$34.44	$36.17	$38.24	$40.74
9.27%	$26.70	$27.73	$28.90	$30.27	$31.86
10.27%	$21.61	$22.34	$23.17	$24.11	$25.20

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

$34.13

-30.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.08

Base Case

$36.17

-26.6% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.86

Bull Case

$36.96

-25.0% 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.

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