What is AADV.L's Intrinsic value?

Albion Development VCT PLC (AADV.L) Intrinsic Value Analysis

Executive Summary

As of June 10, 2025, Albion Development VCT PLC's estimated intrinsic value ranges from $39.59 to $110.24 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $110.24 +29.7%
Discounted Cash Flow (5Y) $95.92 +12.8%
Dividend Discount Model (Multi-Stage) $39.59 -53.4%
Dividend Discount Model (Stable) $86.09 +1.3%

Is Albion Development VCT PLC (AADV.L) undervalued or overvalued?

With the current market price at $85.00, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Albion Development VCT PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.91 0.98
Cost of equity 9.4% 11.8%
Cost of debt 5.0% 5.0%
Tax rate 19.0% 19.0%
Debt/Equity ratio 1 1
After-tax WACC 6.7% 7.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $9 (FY12-2023) to $18 (FY12-2033)
  • Net profit margin expansion from 65% to 53%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $96 $114M 79.1%
10-Year Growth $110 $136M 63.6%
5-Year EBITDA $109 $133M 82.1%
10-Year EBITDA $122 $152M 67.6%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 43.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.6%
  • Long-term growth rate: 2.0%
  • Fair value: $39.59 (-53.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.8% (Low) to 9.4% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $55 to $118
  • Selected fair value: $86.09 (1.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $126M
Enterprise Value $98M
Trailing P/E 10.10
Forward P/E 24.66
Trailing EV/EBITDA 18.15
Current Dividend Yield 427.87%
Dividend Growth Rate (5Y) 12.99%
Debt-to-Equity Ratio 0.82

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $33.07
Discounted Cash Flow (5Y) 28% $23.98
Dividend Discount Model (Multi-Stage) 22% $7.92
Dividend Discount Model (Stable) 17% $12.91
Weighted Average 100% $86.54

Investment Conclusion

Based on our comprehensive valuation analysis, Albion Development VCT PLC's weighted average intrinsic value is $86.54, which is approximately 1.8% above the current market price of $85.00.

Key investment considerations:

  • Strong projected earnings growth (65% to 53% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 12.99%

Given these factors, we believe Albion Development VCT PLC is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.