WEC Energy Group, Inc.WECNYSE

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

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $124.34 per share(market-calibrated)

+7.7%

Upside to Fair Value

Current

$115.45

Pure Model

$128.21

Fair Value

$124.34

Bull Case

$150.54

Bear Case

$107.87

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.98%

Calibrated Growth

1.85%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $128.21.

What's Driving This Ratingfor WEC

↓

CapEx normalizing toward maintenance

Historical CapEx is 29.06% of revenue (heavy investment phase). Model fades this to 5.00% by Year 10, freeing up ~$2.6B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 25.78% 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.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 0.76% in Year 1 to -3.69% by Year 5 (per analyst consensus). That's below the 2.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. 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 $157.16/share (28.9x terminal FCF) while exit multiple gives $99.25/share (19.6x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.98% perpetual growth — 102bps below the model's 2.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 81.82% indicates efficient cash generation. FCF reaches $3.5B by Year 10 (31.60% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.58

Market Risk Premium4.50%

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

Cost of Equity (Re)7.12%

Cost of Debt

Pre-tax Cost of Debt3.07%

Tax Rate7.05%

After-tax Cost of Debt2.85%

Equity Weight (E/V)62.74%

Debt Weight (D/V)37.26%

WACC Calculation

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

WACC = (62.74% × 7.12%) + (37.26% × 2.85%)

= 5.53%

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	$9.9B	$11.0B	$11.1B	$10.7B	$11.0B
EBIT	$2.5B	$2.8B	$2.9B	$2.8B	$2.8B
Tax	$180M	$200M	$202M	$194M	$199M
NOPAT	$2.4B	$2.6B	$2.7B	$2.6B	$2.6B
+ Depreciation	$1.3B	$1.4B	$1.4B	$1.4B	$1.4B
- Capex	$2.9B	$2.6B	$2.0B	$1.4B	$548M
- Δ NWC	$8M	$50M	-$45M	-$16M	$23M
Free Cash Flow	$757M	$1.4B	$2.1B	$2.6B	$3.5B
Discount Factor	0.948	0.851	0.764	0.686	0.584
Present Value	$718M	$1.2B	$1.6B	$1.8B	$2.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.5B

Terminal Growth Rate2.00%

WACC5.53%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$100.0B

PV of Terminal Value$58.4B

Exit Multiple Method

Year 10 EBITDA$4.2B

Exit Multiple (EV/EBITDA)16.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$67.7B

PV of Terminal Value$39.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$15.1B

PV of Terminal Value$58.4B

Enterprise Value$73.4B

(-) Net Debt$22.3B

Equity Value$51.1B

Shares Outstanding325M

Price per Share$157.16

Exit Multiple Method

PV of Projected FCFs$15.1B

PV of Terminal Value$39.5B

Enterprise Value$54.6B

(-) Net Debt$22.3B

Equity Value$32.3B

Shares Outstanding325M

Price per Share$99.25

Pure Model Fair Value

$128.21

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.00%	1.50%	2.00%	2.50%	3.00%
3.53%	$207.30	$245.14	$235.90	$223.35	$211.40
4.53%	$145.13	$161.80	$185.06	$219.76	$211.40
5.53%	$107.73	$116.70	$128.21	$143.51	$164.86
6.53%	$82.01	$87.42	$94.02	$102.26	$112.83
7.53%	$62.84	$66.35	$70.50	$75.47	$81.54

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

$107.87

-6.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.73

Base Case

$128.21

11.1% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.58

Bull Case

$150.54

30.4% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.50

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Utilities Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.76%

Year 3 Revenue Growth4.56%

Year 5 Revenue Growth-3.69%

Year 7 Revenue Growth-1.41%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin25.78%

Tax Rate7.05%

Historical Capex / Rev29.06%

Terminal Capex / Rev5.00%

NWC / Revenue10.53%

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: 16x EV/EBITDA (Utilities 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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