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Southwest Gas Holdings, Inc. (SWX) Intrinsic Value

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

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Southwest Gas Holdings, Inc. (SWX)

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Intrinsic Value (DCF)

Current$81.96
→
Intrinsic$101.40
+24%
$48.33$101.40$202.15
Market implies 17% growth for 5 years
SWX shows 24% potential upside using 20% growth — reasonable if fundamentals hold.
At $82, the market prices in continued high-teens cash flow growth (17%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $48 → Bull $202. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →16%18%20%22%
8%$138$155$173$192
10%$77$89$101$115
12%$44$53$62$72
14%$23$30$37$45

Bull Case

  • Bull case ($202) offers 147% upside at 24% growth, 9% discount
  • 19% margin of safety vs. base case estimate
  • Market-implied growth (17%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($48) implies 41% downside at 16% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$491.83M
Year 2$590.19M
Year 3$708.23M
Year 4$849.88M
Year 5$1.02B
Terminal$15.01B

📐 Model Inputs

Growth Rate20.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$409.86MTTM 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.

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Frequently Asked Questions

Is SWX stock undervalued or overvalued?
🟢 UNDERVALUED

SWX trades at $81.96 vs. our DCF-derived intrinsic value of $101.40, implying +25% upside. At a 10.0% WACC and 20.0% projected FCF growth, the market appears to be underpricing the present value of SWX's future cash flows. The bear case ($44.08) still suggests upside, providing margin of safety.

What is SWX's intrinsic value?

Using a 5-year DCF model: Base FCF of $410M, projected at 20.0% 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 $4.69B net debt and dividing by 0.07B shares: Bear $44.08 | Base $101.40 | Bull $185.80. Current price $81.96 implies +25% to base case.

How is SWX's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 20.0% 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 ($12.00B).

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.