Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Equity Residential's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 2.5% to 2.6% 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 2, DPO 35, DIO 60). At a 7.0% WACC with mid-year discounting, the terminal value (76% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.9x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $63.99 per share, suggesting EQR is fairly valued by 7.4% at the current price of $59.59.
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 | 1,724 | 1,780 | 1,836 | 1,855 | 1,903 | 1,951 |
| (−) Net Interest | 110 | 113 | 117 | 118 | 121 | 124 |
| (+) D&A | 282 | 311 | 329 | 329 | 333 | 341 |
| EBITDA | 2,116 | 2,205 | 2,282 | 2,303 | 2,357 | 2,416 |
| (−) Tax | 3 | 4 | 4 | 4 | 4 | — |
| (−) CapEx | 313 | 323 | 333 | 337 | 345 | — |
| (−) ΔWC | 90 | 3 | 3 | 1 | 3 | — |
| Free Cash Flow (FCF) | 1,710 | 1,875 | 1,942 | 1,961 | 2,005 | — |
| Peers' EBITDA Multiple | 14.9x | |||||
| Terminal Value | 35,924 | |||||
| WACC / Discount Rate | 7.02% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,653 | 1,693 | 1,639 | 1,547 | 1,478 | 25,594 |
| Enterprise Value | 33,604 | |||||
| Projection Period | 8,010 | 23.8% | ||||
| Terminal Value | 25,594 | 76.2% | ||||
| (−) Current Net Debt | 8,728 | |||||
| Equity Value | 24,876 | |||||
| (÷) Outstanding Shares | 389M | |||||
| Fair Price | $64 | +7.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.9x | 12.9x | 14.9x | 16.9x | 18.9x |
|---|---|---|---|---|---|
| 5.0% | $52 | $62 | $71 | $81 | $91 |
| 6.0% | $49 | $58 | $68 | $77 | $86 |
| 7.0% | $46 | $55 | $64 | $73 | $82 |
| 8.0% | $44 | $52 | $61 | $69 | $77 |
| 9.0% | $41 | $49 | $57 | $65 | $73 |
Current price: $59.59. 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.