What is ABCT.TO's Intrinsic value?

Abc Technologies Holdings Inc (ABCT.TO) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Abc Technologies Holdings Inc's estimated intrinsic value ranges from $1.36 to $4.70 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $1.36 -79.9%
Dividend Discount Model (Multi-Stage) $4.70 -30.3%

Is Abc Technologies Holdings Inc (ABCT.TO) undervalued or overvalued?

With the current market price at $6.74, 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 Abc Technologies Holdings Inc'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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.08 1.24
Cost of equity 8.7% 11.7%
Cost of debt 8.1% 14.9%
Tax rate 9.9% 15.2%
Debt/Equity ratio 1.39 1.39
After-tax WACC 7.8% 12.3%

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: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 10.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,433 (FY06-2023) to $2,165 (FY06-2033)
  • Net profit margin expansion from -3% to 4%
  • Capital expenditures maintained at approximately 8% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $572M 86.0%
10-Year Growth $1 $870M 60.8%
5-Year EBITDA $(1,234) $629M 87.3%
10-Year EBITDA $0 $794M 57.0%

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: 10.2%
  • Long-term growth rate: 2.0%
  • Fair value: $4.70 (-30.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.7% (Low) to 8.7% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $(3) to $(6)
  • Selected fair value: $-6.25 (-192.7% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $780M
Enterprise Value $1818M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.00
Current Dividend Yield 224.50%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 1.39

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) 60% $0.41
Dividend Discount Model (Multi-Stage) 40% $0.94
Weighted Average 100% $2.69

Investment Conclusion

Based on our comprehensive valuation analysis, Abc Technologies Holdings Inc's weighted average intrinsic value is $2.69, which is approximately 60.0% below the current market price of $6.74.

Key investment considerations:

  • Strong projected earnings growth (-3% to 4% margin)
  • Consistent cash flow generation

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