What is A2A.MI's DCF valuation?

A2A SpA (A2A.MI) DCF Valuation Analysis

Executive Summary

As of July 10, 2025, A2A SpA has a Discounted Cash Flow (DCF) derived fair value of $4.63 per share. With the current market price at $2.19, this represents a potential upside of 111.0%.

Key Metrics Value
DCF Fair Value (5-year) $4.21
DCF Fair Value (10-year) $4.63
Potential Upside (5-year) 91.9%
Potential Upside (10-year) 111.0%
Discount Rate (WACC) 5.9% - 7.6%

Financial Performance & Projections

Revenue Trends

Revenue is projected to grow from $12570 million in 12-2024 to $18346 million by 12-2034, representing a compound annual growth rate of approximately 3.9%.

Fiscal Year Revenue (USD millions) Growth
12-2024 12570 13%
12-2025 13312 6%
12-2026 13632 2%
12-2027 14333 5%
12-2028 14620 2%
12-2029 14912 2%
12-2030 15414 3%
12-2031 15849 3%
12-2032 16783 6%
12-2033 17324 3%
12-2034 18346 6%

Profitability Projections

Net profit margin is expected to improve from 7% in 12-2024 to 7% by 12-2034, driven by operational efficiency and economies of scale.

Fiscal Year Net Profit (USD millions) Profit Margin
12-2024 892 7%
12-2025 992 7%
12-2026 1016 7%
12-2027 1068 7%
12-2028 1090 7%
12-2029 1111 7%
12-2030 1149 7%
12-2031 1181 7%
12-2032 1251 7%
12-2033 1291 7%
12-2034 1367 7%

DCF Model Components

1. Capital Expenditures (CapEx)

with a 5-year average of $1188 million. Projected CapEx is expected to maintain at approximately 9% of revenue.

2. Depreciation & Amortization

Depreciation is based on an average useful life of 5 years for capital assets.

Fiscal Year D&A (USD millions)
12-2025 1293
12-2026 1337
12-2027 1361
12-2028 1364
12-2029 1345
12-2030 1385

3. Working Capital Requirements

Net working capital is expected to increase gradually, with projected changes affecting free cash flow.

Components Average Days
Days Receivables 90
Days Inventory 11
Days Payables 124

4. Free Cash Flow Projections

Fiscal Year EBITDA Tax CapEx Change in NWC FCF
9M/2025 2018 218 948 (48) 900
2026 2768 297 1294 (30) 1206
2027 2865 313 1361 67 1125
2028 2898 319 1388 (19) 1210
2029 2910 325 1416 3 1165

DCF Valuation Parameters

Key Assumptions

  • Discount Rate (WACC): WACC / Discount Rate (selected: 5.9% - 7.6%)
  • Long-Term Growth Rate: Long-term Growth Rate (selected: 0.0% - 1.0%)
  • Terminal EV/EBITDA Multiple: 3.8x (based on peer average)

Valuation Summary

Valuation Method Fair Price (USD) Potential Upside
5-Year DCF (Growth) 4.21 91.9%
10-Year DCF (Growth) 4.63 111.0%
5-Year DCF (EBITDA) 2.37 8.0%
10-Year DCF (EBITDA) 3.22 46.9%

Enterprise Value Breakdown

  • 5-Year Model: $18,671M
  • 10-Year Model: $19,981M

Investment Conclusion

Is A2A SpA (A2A.MI) a buy or a sell? A2A SpA is definitely a buy. Based on our DCF analysis, A2A SpA (A2A.MI) appears to be significantly undervalued with upside potential of 111.0%. The company's strong projected growth in revenue and profitability, coupled with consistent capital expenditure, supports our positive outlook on its intrinsic value.

Key investment drivers include:

  • Steady revenue growth (3.9% CAGR)

Investors should consider a strong buy at the current market price of $2.19.