Using an unlevered Free Cash Flow to Firm (FCFF) model, we project The Southern Company's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 4.0% to 5.4% 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 52, DPO 75, DIO 72). At a 6.3% WACC with mid-year discounting, the terminal value (86% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 13.2x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $209.33 per share, suggesting SO is undervalued by 120.0% at the current price of $95.16.
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 | 8,342 | 8,797 | 9,335 | 9,738 | 10,262 | 10,519 |
| (−) Net Interest | 2,826 | 2,980 | 3,163 | 3,299 | 3,477 | 3,564 |
| (+) D&A | 9,321 | 10,002 | 10,663 | 11,227 | 11,921 | 12,219 |
| EBITDA | 20,489 | 21,780 | 23,161 | 24,264 | 25,660 | 26,302 |
| (−) Tax | 1,263 | 1,332 | 1,413 | 1,474 | 1,554 | — |
| (−) CapEx | 10,646 | 11,227 | 11,913 | 12,427 | 13,096 | — |
| (−) ΔWC | 538 | 231 | 273 | 204 | 266 | — |
| Free Cash Flow (FCF) | 8,043 | 8,991 | 9,561 | 10,158 | 10,744 | — |
| Peers' EBITDA Multiple | 13.2x | |||||
| Terminal Value | 346,919 | |||||
| WACC / Discount Rate | 6.28% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 7,801 | 8,205 | 8,211 | 8,207 | 8,168 | 255,830 |
| Enterprise Value | 296,423 | |||||
| Projection Period | 40,593 | 13.7% | ||||
| Terminal Value | 255,830 | 86.3% | ||||
| (−) Current Net Debt | 64,179 | |||||
| Equity Value | 232,244 | |||||
| (÷) Outstanding Shares | 1109M | |||||
| Fair Price | $209 | +120.1% | ||||
| WACC \ EV/EBITDA Exit Multiple | 9.2x | 11.2x | 13.2x | 15.2x | 17.2x |
|---|---|---|---|---|---|
| 4.3% | $157 | $196 | $234 | $273 | $311 |
| 5.3% | $148 | $185 | $221 | $258 | $295 |
| 6.3% | $139 | $174 | $209 | $244 | $279 |
| 7.3% | $131 | $165 | $198 | $231 | $265 |
| 8.3% | $123 | $155 | $187 | $219 | $251 |
Current price: $95.16. 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.