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Talen Energy Corporation (TLN) Intrinsic Value

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

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Talen Energy Corporation (TLN)

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Intrinsic Value (DCF)

Current$419.07
→
Intrinsic$620.69
+48%
$407.86$620.69$1,024.77
Market implies 11% growth for 5 years
DCF analysis suggests TLN could have 48% upside at 20% growth — verify assumptions match your view.
At $419, the market prices in 11% annual cash flow growth — a moderate expectation aligned with historical trends (20%).
Range: Bear $408 → Bull $1025. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →16%18%20%22%
8%$767$835$907$984
10%$525$571$621$673
12%$391$425$462$502
14%$306$333$362$393

Bull Case

  • Bull case ($1025) offers 145% upside at 24% growth, 9% discount
  • 32% margin of safety vs. base case estimate
  • Market-implied growth (11%) ≤ historical CAGR (20%)

Bear Case

  • Bear case ($408) implies 3% downside at 16% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$1.55B
Year 2$1.86B
Year 3$2.23B
Year 4$2.67B
Year 5$3.21B
Terminal$47.20B

📐 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$1.29BTTM 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 TLN stock undervalued or overvalued?
🟢 UNDERVALUED

TLN trades at $419.07 vs. our DCF-derived intrinsic value of $620.69, implying +58% upside. At a 10.0% WACC and 20.0% projected FCF growth, the market appears to be underpricing the present value of TLN's future cash flows. The bear case ($390.81) still suggests upside, providing margin of safety.

What is TLN's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.29B, 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 $2.67B net debt and dividing by 0.06B shares: Bear $390.81 | Base $620.69 | Bull $959.21. Current price $419.07 implies +58% to base case.

How is TLN'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 ($37.74B).

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.