T-Mobile US, Inc.TMUSNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $559.59 per share(market-calibrated)

+154.6%

Upside to Fair Value

Current

$219.84

Pure Model

$656.38

Fair Value

$559.59

Bull Case

$827.21

Bear Case

$536.33

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $656.38.

What's Driving This Ratingfor TMUS

↓

CapEx normalizing toward maintenance

Historical CapEx is 16.32% of revenue (heavy investment phase). Model fades this to 4.50% by Year 10, freeing up ~$15.2B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 15.65% — below the sector mature average of 22.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $25.7B (19.92% margin).

→

Moderate revenue growth

Analyst consensus projects 7.11% revenue growth, fading to 3.00% by Year 10. Revenue reaches $128.9B (vs $88.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $758.84/share (41.2x terminal FCF) while exit multiple gives $553.92/share (29.6x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 74.28% indicates efficient cash generation. FCF reaches $34.1B by Year 10 (26.45% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.43

Market Risk Premium4.50%

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

Cost of Equity (Re)6.46%

Cost of Debt

Pre-tax Cost of Debt2.78%

Tax Rate23.03%

After-tax Cost of Debt2.14%

Equity Weight (E/V)66.98%

Debt Weight (D/V)33.02%

WACC Calculation

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

WACC = (66.98% × 6.46%) + (33.02% × 2.14%)

= 5.50%

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	$94.6B	$102.8B	$110.2B	$117.6B	$128.9B
EBIT	$14.8B	$16.1B	$17.2B	$21.1B	$25.7B
Tax	$3.4B	$3.7B	$4.0B	$4.9B	$5.9B
NOPAT	$11.4B	$12.4B	$13.3B	$16.2B	$19.8B
+ Depreciation	$14.8B	$16.1B	$17.3B	$18.5B	$20.2B
- Capex	$15.4B	$14.1B	$12.2B	$9.9B	$5.8B
- Δ NWC	$154M	$100M	$91M	$92M	$92M
Free Cash Flow	$10.6B	$14.3B	$18.3B	$24.7B	$34.1B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$10.1B	$12.2B	$14.0B	$17.0B	$20.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$34.1B

Terminal Growth Rate3.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$1.4T

PV of Terminal Value$822.2B

Exit Multiple Method

Year 10 EBITDA$45.9B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.0T

PV of Terminal Value$591.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$150.4B

PV of Terminal Value$822.2B

Enterprise Value$972.6B

(-) Net Debt$116.7B

Equity Value$856.0B

Shares Outstanding1.1B

Price per Share$758.84

Exit Multiple Method

PV of Projected FCFs$150.4B

PV of Terminal Value$591.1B

Enterprise Value$741.5B

(-) Net Debt$116.7B

Equity Value$624.8B

Shares Outstanding1.1B

Price per Share$553.92

Pure Model Fair Value

$656.38

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
3.50%	$865.21	$824.83	$786.36	$749.71	$714.79
4.50%	$723.14	$824.83	$786.36	$749.71	$714.79
5.50%	$549.72	$594.16	$656.38	$749.71	$714.79
6.50%	$443.35	$467.16	$497.78	$538.61	$595.76
7.50%	$368.70	$383.03	$400.55	$422.44	$450.59

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

$536.33

144.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.54

Base Case

$656.38

198.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 0.43

Bull Case

$827.21

276.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.37

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Communication Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth7.11%

Year 3 Revenue Growth4.11%

Year 5 Revenue Growth3.46%

Year 7 Revenue Growth3.28%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.65%

Terminal EBIT Margin22.00%

Tax Rate23.03%

Historical Capex / Rev16.32%

Terminal Capex / Rev4.50%

NWC / Revenue2.46%

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: 22x EV/EBITDA (Communication 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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