Stock Analysis on Net
Stock Analysis on Net

Expand Energy Corp. (NASDAQ:EXE)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Expand Energy Corp., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 9.00%
01 FCFF0 108
1 FCFF1 139 = 108 × (1 + 28.67%) 127
2 FCFF2 172 = 139 × (1 + 23.65%) 145
3 FCFF3 204 = 172 × (1 + 18.64%) 157
4 FCFF4 232 = 204 × (1 + 13.62%) 164
5 FCFF5 251 = 232 × (1 + 8.61%) 163
5 Terminal value (TV5) 68,976 = 251 × (1 + 8.61%) ÷ (9.00% – 8.61%) 44,823
Intrinsic value of Expand Energy Corp. capital 45,580
Less: Debt (fair value) 5,548
Intrinsic value of Expand Energy Corp. common stock 40,032
 
Intrinsic value of Expand Energy Corp. common stock (per share) $172.03
Current share price $103.42

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Expand Energy Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 24,066 0.81 10.05%
Debt (fair value) 5,548 0.19 4.45% = 5.55% × (1 – 19.88%)

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 232,699,939 × $103.42
= $24,065,827,691.38

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (15.10% + 22.40% + 21.00% + 21.00%) ÷ 4
= 19.88%

WACC = 9.00%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Expand Energy Corp., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
Selected Financial Data (US$ in millions)
Interest expense 123 104 160 84
Net income (loss) (714) 2,419 4,936 6,328
 
Effective income tax rate (EITR)1 15.10% 22.40% 21.00% 21.00%
 
Interest expense, after tax2 104 81 126 66
Add: Dividends on common stock 384 487 1,222 120
Interest expense (after tax) and dividends 488 568 1,348 186
 
EBIT(1 – EITR)3 (610) 2,500 5,062 6,394
 
Current maturities of long-term debt, net 389 — — —
Long-term debt, net, excluding current maturities 5,291 2,028 3,093 2,278
Stockholders’ equity 17,565 10,729 9,124 5,671
Total capital 23,245 12,757 12,217 7,949
Financial Ratios
Retention rate (RR)4 — 0.77 0.73 0.97
Return on invested capital (ROIC)5 -2.62% 19.59% 41.44% 80.44%
Averages
RR 0.83
ROIC 34.71%
 
FCFF growth rate (g)6 28.67%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).

1 See details »

2024 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 123 × (1 – 15.10%)
= 104

3 EBIT(1 – EITR) = Net income (loss) + Interest expense, after tax
= -714 + 104
= -610

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [-610 – 488] ÷ -610
= —

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × -610 ÷ 23,245
= -2.62%

6 g = RR × ROIC
= 0.83 × 34.71%
= 28.67%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (29,614 × 9.00% – 108) ÷ (29,614 + 108)
= 8.61%

where:

Total capital, fair value0 = current fair value of Expand Energy Corp. debt and equity (US$ in millions)
FCFF0 = the last year Expand Energy Corp. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Expand Energy Corp. capital

FCFF growth rate (g) forecast

Expand Energy Corp., H-model

Microsoft Excel
Year Value gt
1 g1 28.67%
2 g2 23.65%
3 g3 18.64%
4 g4 13.62%
5 and thereafter g5 8.61%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 28.67% + (8.61% – 28.67%) × (2 – 1) ÷ (5 – 1)
= 23.65%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 28.67% + (8.61% – 28.67%) × (3 – 1) ÷ (5 – 1)
= 18.64%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 28.67% + (8.61% – 28.67%) × (4 – 1) ÷ (5 – 1)
= 13.62%