What is AAU.L's Intrinsic value?

Ariana Resources PLC (AAU.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Ariana Resources PLC's estimated intrinsic value ranges from $0.87 to $0.87 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $0.87 -21.0%

Is Ariana Resources PLC (AAU.L) undervalued or overvalued?

With the current market price at $1.10, the stock appears to be significantly overvalued.

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 Ariana Resources PLC's intrinsic value, including:

  1. 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 0.34 0.47
Cost of equity 6.0% 8.3%
Cost of debt 5.0% 5.0%
Tax rate 14.4% 31.7%
Debt/Equity ratio 1 1
After-tax WACC 5.1% 5.8%

Valuation Methods

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: 2.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.1%
  • Long-term growth rate: 4.0%
  • Fair value: $-0.00 (-100.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.3% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $0 to $2
  • Selected fair value: $0.87 (-21.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $21M
Enterprise Value $20M
Trailing P/E 64.65
Forward P/E 64.65
Trailing EV/EBITDA 0.00
Current Dividend Yield 3.43%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.11

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
Dividend Discount Model (Stable) 100% $0.13
Weighted Average 100% $0.87

Investment Conclusion

Based on our comprehensive valuation analysis, Ariana Resources PLC's weighted average intrinsic value is $0.87, which is approximately 21.0% below the current market price of $1.10.

Key investment considerations:

  • Overall financial health and market position

Given these factors, we believe Ariana Resources PLC is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.