The Williams Companies, Inc.WMBNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $143.15 per share(market-calibrated)

+90.4%

Upside to Fair Value

Current

$75.18

Pure Model

$151.14

Fair Value

$143.15

Bull Case

$223.05

Bear Case

$103.69

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.48%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $151.14.

What's Driving This Ratingfor WMB

↓

CapEx normalizing toward maintenance

Historical CapEx is 22.70% of revenue (heavy investment phase). Model fades this to 5.50% by Year 10, freeing up ~$5.8B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 39.96% 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.

→

Moderate revenue growth

Analyst consensus projects 6.91% revenue growth, fading to 2.00% by Year 10. Revenue reaches $33.6B (vs $11.9B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 150bps 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 73.67% indicates efficient cash generation. FCF reaches $14.2B by Year 10 (42.37% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.65

Market Risk Premium4.50%

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

Cost of Equity (Re)7.42%

Cost of Debt

Pre-tax Cost of Debt4.34%

Tax Rate23.64%

After-tax Cost of Debt3.31%

Equity Weight (E/V)75.77%

Debt Weight (D/V)24.23%

WACC Calculation

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

WACC = (75.77% × 7.42%) + (24.23% × 3.31%)

= 6.42%

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	$12.8B	$15.5B	$20.8B	$28.2B	$33.6B
EBIT	$5.1B	$6.2B	$8.3B	$11.3B	$13.4B
Tax	$1.2B	$1.5B	$2.0B	$2.7B	$3.2B
NOPAT	$3.9B	$4.7B	$6.4B	$8.6B	$10.3B
+ Depreciation	$2.2B	$2.7B	$3.7B	$4.9B	$5.9B
- Capex	$2.9B	$2.9B	$3.1B	$3.2B	$1.8B
- Δ NWC	$83M	$139M	$383M	$353M	$66M
Free Cash Flow	$3.2B	$4.4B	$6.5B	$10.0B	$14.2B
Discount Factor	0.940	0.830	0.732	0.647	0.536
Present Value	$3.0B	$3.6B	$4.8B	$6.5B	$7.6B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$14.2B

Terminal Growth Rate2.00%

WACC6.42%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$328.4B

PV of Terminal Value$176.2B

Exit Multiple Method

Year 10 EBITDA$19.3B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$270.7B

PV of Terminal Value$145.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$53.1B

PV of Terminal Value$176.2B

Enterprise Value$229.3B

(-) Net Debt$29.3B

Equity Value$200.0B

Shares Outstanding1.2B

Price per Share$163.81

Exit Multiple Method

PV of Projected FCFs$53.1B

PV of Terminal Value$145.2B

Enterprise Value$198.4B

(-) Net Debt$29.3B

Equity Value$169.1B

Shares Outstanding1.2B

Price per Share$138.47

Pure Model Fair Value

$151.14

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%
4.42%	$208.70	$228.42	$256.27	$288.89	$275.98
5.42%	$166.13	$176.57	$190.05	$208.15	$233.72
6.42%	$137.26	$143.50	$151.14	$160.73	$173.12
7.42%	$115.97	$119.99	$124.75	$130.48	$137.51
8.42%	$99.38	$102.12	$105.28	$108.98	$113.36

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

$103.69

37.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.81

Base Case

$151.14

101.0% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.65

Bull Case

$223.05

196.7% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.55

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.91%

Year 3 Revenue Growth9.86%

Year 5 Revenue Growth22.50%

Year 7 Revenue Growth14.30%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin39.96%

Tax Rate23.64%

Historical Capex / Rev22.70%

Terminal Capex / Rev5.50%

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: 14x EV/EBITDA (Energy 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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