Welltower Inc.WELLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $130.44 per share(market-calibrated)

-37.5%

Upside to Fair Value

Current

$208.76

Pure Model

$123.46

Fair Value

$130.44

Bull Case

$162.26

Bear Case

$90.58

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

4.96%

Calibrated Growth

3.11%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $123.46.

What's Driving This Ratingfor WELL

✓

CapEx already efficient

CapEx at 0.36% 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 11.32% — below the sector mature average of 30.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.7B (25.10% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 22.24% in Year 1 to 2.50% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

🎯

Market pricing in higher long-term growth

To justify $208.76, the market implies 4.96% perpetual growth — 246bps 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 83.94% indicates efficient cash generation. FCF reaches $6.1B by Year 10 (33.05% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.83

Market Risk Premium4.50%

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

Cost of Equity (Re)8.24%

Cost of Debt

Pre-tax Cost of Debt2.67%

Tax Rate21.00%

After-tax Cost of Debt2.11%

Equity Weight (E/V)86.67%

Debt Weight (D/V)13.33%

WACC Calculation

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

WACC = (86.67% × 8.24%) + (13.33% × 2.11%)

= 7.43%

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	$13.0B	$16.8B	$16.4B	$17.2B	$18.5B
EBIT	$1.5B	$1.9B	$2.5B	$3.5B	$4.7B
Tax	$310M	$400M	$518M	$738M	$977M
NOPAT	$1.2B	$1.5B	$1.9B	$2.8B	$3.7B
+ Depreciation	$1.9B	$2.4B	$2.3B	$2.5B	$2.6B
- Capex	$47M	$61M	$59M	$62M	$67M
- Δ NWC	$672M	$654M	$113M	$119M	$128M
Free Cash Flow	$2.3B	$3.2B	$4.1B	$5.1B	$6.1B
Discount Factor	0.931	0.807	0.699	0.606	0.489
Present Value	$2.1B	$2.6B	$2.9B	$3.1B	$3.0B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$6.1B

Terminal Growth Rate2.50%

WACC7.43%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$127.4B

PV of Terminal Value$62.2B

Exit Multiple Method

Year 10 EBITDA$7.3B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$160.5B

PV of Terminal Value$78.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$28.2B

PV of Terminal Value$62.2B

Enterprise Value$90.4B

(-) Net Debt$16.3B

Equity Value$74.1B

Shares Outstanding666M

Price per Share$111.32

Exit Multiple Method

PV of Projected FCFs$28.2B

PV of Terminal Value$78.4B

Enterprise Value$106.6B

(-) Net Debt$16.3B

Equity Value$90.3B

Shares Outstanding666M

Price per Share$135.60

Pure Model Fair Value

$123.46

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%
5.43%	$163.89	$174.52	$188.78	$208.91	$232.43
6.43%	$135.67	$141.70	$149.25	$159.02	$172.11
7.43%	$115.19	$118.94	$123.46	$129.00	$135.94
8.43%	$99.32	$101.82	$104.73	$108.19	$112.34
9.43%	$86.49	$88.23	$90.22	$92.52	$95.20

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

$90.58

-56.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.04

Base Case

$123.46

-40.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.83

Bull Case

$162.26

-22.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.71

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth22.24%

Year 3 Revenue Growth15.87%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin11.32%

Terminal EBIT Margin30.00%

Tax Rate21.00%

Historical Capex / Rev0.36%

NWC / Revenue28.34%

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 (Real Estate 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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