Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Pinnacle West Capital Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 4.0% to 4.4% 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 50, DPO 61, DIO 61). At a 5.0% WACC with mid-year discounting, the terminal value (88% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 12.7x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $306.71 per share, suggesting PNW is undervalued by 212.0% at the current price of $98.29.
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 | 1,456 | 1,556 | 1,629 | 1,701 | 1,776 | 1,820 |
| (−) Net Interest | 382 | 408 | 427 | 446 | 465 | 477 |
| (+) D&A | 1,980 | 2,153 | 2,311 | 2,465 | 2,562 | 2,626 |
| EBITDA | 3,818 | 4,117 | 4,367 | 4,612 | 4,803 | 4,923 |
| (−) Tax | 204 | 218 | 228 | 239 | 249 | — |
| (−) CapEx | 2,339 | 2,498 | 2,616 | 2,731 | 2,851 | — |
| (−) ΔWC | 142 | 52 | 38 | 38 | 39 | — |
| Free Cash Flow (FCF) | 1,134 | 1,348 | 1,485 | 1,604 | 1,663 | — |
| Peers' EBITDA Multiple | 12.7x | |||||
| Terminal Value | 62,372 | |||||
| WACC / Discount Rate | 5.00% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,106 | 1,253 | 1,314 | 1,353 | 1,335 | 48,870 |
| Enterprise Value | 55,232 | |||||
| Projection Period | 6,362 | 11.5% | ||||
| Terminal Value | 48,870 | 88.5% | ||||
| (−) Current Net Debt | 17,841 | |||||
| Equity Value | 37,391 | |||||
| (÷) Outstanding Shares | 122M | |||||
| Fair Price | $307 | +211.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 8.7x | 10.7x | 12.7x | 14.7x | 16.7x |
|---|---|---|---|---|---|
| 3.0% | $211 | $280 | $350 | $419 | $489 |
| 4.0% | $195 | $261 | $328 | $394 | $460 |
| 5.0% | $180 | $243 | $307 | $370 | $433 |
| 6.0% | $166 | $227 | $287 | $347 | $408 |
| 7.0% | $153 | $211 | $268 | $326 | $383 |
Current price: $98.29. 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.