Using an unlevered Free Cash Flow to Firm (FCFF) model, we project American Water Works Company, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 5.0% to 7.0% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 71, DPO 57, DIO 20). At a 5.8% WACC with mid-year discounting, the terminal value (89% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 13.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $362.33 per share, suggesting AWK is undervalued by 163.1% at the current price of $137.74.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 2,320 | 2,490 | 2,659 | 3,039 | 3,252 | 3,334 |
| (−) Net Interest | 601 | 645 | 689 | 787 | 843 | 864 |
| (+) D&A | 2,602 | 2,870 | 3,077 | 3,267 | 3,538 | 3,627 |
| EBITDA | 5,523 | 6,006 | 6,425 | 7,093 | 7,633 | 7,824 |
| (−) Tax | 498 | 534 | 570 | 652 | 698 | — |
| (−) CapEx | 3,216 | 3,452 | 3,686 | 4,212 | 4,508 | — |
| (−) ΔWC | -449 | 59 | 59 | 132 | 74 | — |
| Free Cash Flow (FCF) | 2,259 | 1,961 | 2,110 | 2,098 | 2,353 | — |
| Peers' EBITDA Multiple | 13.1x | |||||
| Terminal Value | 102,414 | |||||
| WACC / Discount Rate | 5.84% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 2,196 | 1,801 | 1,831 | 1,719 | 1,823 | 77,098 |
| Enterprise Value | 86,467 | |||||
| Projection Period | 9,369 | 10.8% | ||||
| Terminal Value | 77,098 | 89.2% | ||||
| (−) Current Net Debt | 15,799 | |||||
| Equity Value | 70,668 | |||||
| (÷) Outstanding Shares | 195M | |||||
| Fair Price | $362 | +163.1% | ||||
| WACC \ EV/EBITDA Exit Multiple | 9.1x | 11.1x | 13.1x | 15.1x | 17.1x |
|---|---|---|---|---|---|
| 3.8% | $271 | $338 | $404 | $471 | $537 |
| 4.8% | $256 | $319 | $383 | $446 | $509 |
| 5.8% | $242 | $302 | $362 | $423 | $483 |
| 6.8% | $228 | $285 | $343 | $401 | $458 |
| 7.8% | $215 | $270 | $325 | $380 | $435 |
Current price: $137.74. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.