NRG Energy, Inc. (NRG) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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NRG Energy, Inc. (NRG)

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Intrinsic Value (DCF)

Current$150.59

→

Intrinsic$241.02

+60%

$149.05$241.02$415.55

Market implies 14% growth for 5 years

Growth 23%

Discount 10%

Terminal 3%

DCF analysis suggests NRG could have 60% upside at 23% growth — verify assumptions match your view.

At $151, the market prices in 14% annual cash flow growth — a moderate expectation aligned with historical trends (23%).

Range: Bear $149 → Bull $416. Current price implies expectations below the base case, but well above the bear case.

Discount ↓Growth →	19%	21%	23%	25%
8%	$306	$335	$366	$398
10%	$200	$220	$241	$263
12%	$142	$156	$172	$189
14%	$105	$116	$128	$141

Bull Case

Bull case ($416) offers 176% upside at 28% growth, 9% discount
38% margin of safety vs. base case estimate
Market-implied growth (14%) ≤ historical CAGR (23%)

Bear Case

Bear case ($149) implies 1% downside at 19% growth, 12% discount
Using 23% growth — aggressive, watch for mean reversion

Intrinsic Value vs Current Price

5-Year Cash Flow Projection

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5-Year Free Cash Flow Projection

Year 1$2.26B

Year 2$2.79B

Year 3$3.45B

Year 4$4.26B

Year 5$5.25B

Terminal$77.30B

📐 Model Inputs

Growth Rate23.4%5Y CAGR (cascade: 5Y→3Y→TTM)

Discount Rate10.0%WACC estimate

Terminal Growth3.0%Perpetuity rate

Base Free Cash Flow$1.83BTTM actual

Bear g×0.8, r+2%

Base Historical CAGR

Bull g×1.2, r−1.5%

ℹ️

DCF estimates based on historical growth rates extrapolated forward. Regulated returns may affect assumptions. See FAQ below for full methodology.

Frequently Asked Questions

Is NRG stock undervalued or overvalued?

🟢 UNDERVALUED

NRG trades at $150.59 vs. our DCF-derived intrinsic value of $205.97, implying +29% upside. At a 10.0% WACC and 23.4% projected FCF growth, the market appears to be underpricing the present value of NRG's future cash flows. The bear case ($118.82) still suggests upside, providing margin of safety.

What is NRG's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.83B, projected at 23.4% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $10.03B net debt and dividing by 0.21B shares: Bear $118.82 | Base $205.97 | Bull $334.30. Current price $150.59 implies +29% to base case.

How is NRG's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 23.4% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($53.69B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.

NRG Energy, Inc. (NRG) Intrinsic Value