What is ABBN.SW's Intrinsic value?

Abb Ltd (ABBN.SW) Intrinsic Value Analysis

Executive Summary

As of May 25, 2025, Abb Ltd's estimated intrinsic value ranges from $23.10 to $70.00 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $51.85 +10.9%
Discounted Cash Flow (5Y) $46.38 -0.8%
Dividend Discount Model (Multi-Stage) $42.85 -8.4%
Dividend Discount Model (Stable) $70.00 +49.7%
Earnings Power Value $23.10 -50.6%

Is Abb Ltd (ABBN.SW) undervalued or overvalued?

With the current market price at $46.76, 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 Abb Ltd'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
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

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 1.0% 1.5%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.87 0.93
Cost of equity 5.4% 7.7%
Cost of debt 4.0% 4.5%
Tax rate 21.2% 23.2%
Debt/Equity ratio 0.07 0.07
After-tax WACC 5.3% 7.4%

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: 6.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $32,850 (FY12-2024) to $49,762 (FY12-2034)
  • Net profit margin expansion from 12% to 12%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $56 $108,413M 85.1%
10-Year Growth $63 $120,807M 73.4%
5-Year EBITDA $28 $55,651M 71.0%
10-Year EBITDA $35 $68,751M 53.3%

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: 20.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 6.5%
  • Long-term growth rate: 3.0%
  • Fair value: $42.85 (-8.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.7% (Low) to 5.4% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $27 to $143
  • Selected fair value: $70.00 (49.7% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $3,423M
Discount Rate (WACC) 7.4% - 5.3%
Enterprise Value $46,233M - $65,086M
Net Debt $3,326M
Equity Value $42,907M - $61,760M
Outstanding Shares 1,861M
Fair Value $23 - $33
Selected Fair Value $23.10

Key Financial Metrics

Metric Value
Market Capitalization $87002M
Enterprise Value $89733M
Trailing P/E 25.64
Forward P/E 25.84
Trailing EV/EBITDA 7.70
Current Dividend Yield 80.23%
Dividend Growth Rate (5Y) 0.47%
Debt-to-Equity Ratio 0.07

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) 30% $15.56
Discounted Cash Flow (5Y) 25% $11.60
Dividend Discount Model (Multi-Stage) 20% $8.57
Dividend Discount Model (Stable) 15% $10.50
Earnings Power Value 10% $2.31
Weighted Average 100% $48.53

Investment Conclusion

Based on our comprehensive valuation analysis, Abb Ltd's weighted average intrinsic value is $48.53, which is approximately 3.8% above the current market price of $46.76.

Key investment considerations:

  • Strong projected earnings growth (12% to 12% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.07)
  • Historical dividend growth of 0.47%

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