What is ABST.TO's Intrinsic value?

Absolute Software Corp (ABST.TO) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, Absolute Software Corp's estimated intrinsic value ranges from $2.93 to $3.28 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $3.28 -78.4%
Earnings Power Value $2.93 -80.7%

Is Absolute Software Corp (ABST.TO) undervalued or overvalued?

With the current market price at $15.20, 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 Absolute Software Corp's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. 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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.45 0.57
Cost of equity 5.5% 7.6%
Cost of debt 7.0% 7.0%
Tax rate 23.9% 30.4%
Debt/Equity ratio 0.47 0.47
After-tax WACC 5.4% 6.8%

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: 6.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $197 (FY06-2022) to $641 (FY06-2032)
  • Net profit margin expansion from -12% to -7%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $(55)M 96.0%
10-Year Growth $2 $347M 91.8%
5-Year EBITDA $(1,234) $50M 104.3%
10-Year EBITDA $(1,234) $151M 81.1%

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) 6.8% - 5.4%
Enterprise Value $296M - $369M
Net Debt $218M
Equity Value $78M - $151M
Outstanding Shares 53M
Fair Value $1 - $3
Selected Fair Value $2.93

Key Financial Metrics

Metric Value
Market Capitalization $807M
Enterprise Value $1104M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 10.65
Current Dividend Yield 210.30%
Dividend Growth Rate (5Y) 5.84%
Debt-to-Equity Ratio 0.47

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) 75% $0.98
Earnings Power Value 25% $0.29
Weighted Average 100% $3.19

Investment Conclusion

Based on our comprehensive valuation analysis, Absolute Software Corp's weighted average intrinsic value is $3.19, which is approximately 79.0% below the current market price of $15.20.

Key investment considerations:

  • Strong projected earnings growth (-12% to -7% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 5.84%

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