Welltower Inc.WELLNYSE

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $132.14 per share(market-calibrated)

-34.8%

Upside to Fair Value

Current

$202.61

Pure Model

$125.48

Fair Value

$132.14

Bull Case

$165.13

Bear Case

$92.12

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

4.76%

Calibrated Growth

3.06%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $125.48.

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 22.85% 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 $202.61, the market implies 4.76% perpetual growth — 226bps 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)0.81

Market Risk Premium4.50%

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

Cost of Equity (Re)8.16%

Cost of Debt

Pre-tax Cost of Debt2.67%

Tax Rate21.00%

After-tax Cost of Debt2.11%

Equity Weight (E/V)86.32%

Debt Weight (D/V)13.68%

WACC Calculation

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

WACC = (86.32% × 8.16%) + (13.68% × 2.11%)

= 7.33%

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	$13.1B	$16.5B	$16.4B	$17.2B	$18.5B
EBIT	$1.5B	$1.9B	$2.5B	$3.5B	$4.7B
Tax	$311M	$391M	$518M	$738M	$977M
NOPAT	$1.2B	$1.5B	$1.9B	$2.8B	$3.7B
+ Depreciation	$1.9B	$2.3B	$2.3B	$2.5B	$2.6B
- Capex	$47M	$59M	$59M	$62M	$67M
- Δ NWC	$691M	$532M	$113M	$119M	$128M
Free Cash Flow	$2.3B	$3.2B	$4.1B	$5.1B	$6.1B
Discount Factor	0.932	0.809	0.702	0.609	0.493
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%

WACC7.33%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$129.9B

PV of Terminal Value$64.0B

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$79.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$28.3B

PV of Terminal Value$64.0B

Enterprise Value$92.3B

(-) Net Debt$16.3B

Equity Value$76.0B

Shares Outstanding666M

Price per Share$114.16

Exit Multiple Method

PV of Projected FCFs$28.3B

PV of Terminal Value$79.1B

Enterprise Value$107.4B

(-) Net Debt$16.3B

Equity Value$91.1B

Shares Outstanding666M

Price per Share$136.79

Pure Model Fair Value

$125.48

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%
5.33%	$167.10	$178.40	$193.68	$215.53	$232.35
6.33%	$137.88	$144.21	$152.19	$162.56	$176.60
7.33%	$116.84	$120.75	$125.48	$131.29	$138.62
8.33%	$100.61	$103.20	$106.23	$109.83	$114.18
9.33%	$87.55	$89.34	$91.40	$93.78	$96.57

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

$92.12

-54.5% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.02

Base Case

$125.48

-38.1% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.81

Bull Case

$165.13

-18.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.69

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth22.85%

Year 3 Revenue Growth12.89%

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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