What is ABC.L's Intrinsic value?

Abcam PLC (ABC.L) Intrinsic Value Analysis

Executive Summary

As of June 10, 2025, Abcam PLC's estimated intrinsic value ranges from $73.86 to $373.84 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $372.68 -69.6%
Discounted Cash Flow (5Y) $373.84 -69.5%
Dividend Discount Model (Multi-Stage) $306.80 -75.0%
Dividend Discount Model (Stable) $125.36 -89.8%
Earnings Power Value $73.86 -94.0%

Is Abcam PLC (ABC.L) undervalued or overvalued?

With the current market price at $1226.00, 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 Abcam 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
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.39 0.49
Cost of equity 6.3% 8.4%
Cost of debt 5.2% 5.2%
Tax rate 18.9% 26.4%
Debt/Equity ratio 0.08 0.08
After-tax WACC 6.1% 8.1%

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: 7.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $463 (FY12-2021) to $479 (FY12-2031)
  • Net profit margin expansion from 4% to 10%
  • Capital expenditures maintained at approximately 17% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $374 $946M 89.5%
10-Year Growth $373 $943M 76.5%
5-Year EBITDA $477 $1,173M 91.5%
10-Year EBITDA $459 $1,134M 80.4%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.4%
  • Long-term growth rate: 4.0%
  • Fair value: $306.80 (-75.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.4% (Low) to 6.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $40 to $211
  • Selected fair value: $125.36 (-89.8% 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 $20M
Discount Rate (WACC) 8.1% - 6.1%
Enterprise Value $245M - $322M
Net Debt $120M
Equity Value $125M - $202M
Outstanding Shares 2M
Fair Value $56 - $91
Selected Fair Value $73.86

Key Financial Metrics

Metric Value
Market Capitalization $2708M
Enterprise Value $2828M
Trailing P/E 398.20
Forward P/E 166.07
Trailing EV/EBITDA 13.30
Current Dividend Yield 24.81%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.08

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% $111.80
Discounted Cash Flow (5Y) 25% $93.46
Dividend Discount Model (Multi-Stage) 20% $61.36
Dividend Discount Model (Stable) 15% $18.80
Earnings Power Value 10% $7.39
Weighted Average 100% $292.81

Investment Conclusion

Based on our comprehensive valuation analysis, Abcam PLC's weighted average intrinsic value is $292.81, which is approximately 76.1% below the current market price of $1226.00.

Key investment considerations:

  • Strong projected earnings growth (4% to 10% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

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