What is AC.PA's Intrinsic value?

Accor SA (AC.PA) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Accor SA's estimated intrinsic value ranges from $45.29 to $81.94 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $81.94 +75.3%
Discounted Cash Flow (5Y) $59.89 +28.1%
Dividend Discount Model (Multi-Stage) $63.21 +35.2%
Dividend Discount Model (Stable) $46.42 -0.7%
Earnings Power Value $45.29 -3.1%

Is Accor SA (AC.PA) undervalued or overvalued?

With the current market price at $46.74, the stock appears to be significantly undervalued.

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 Accor SA'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 3.0% 3.5%
Equity market risk premium 5.8% 6.8%
Adjusted beta 0.56 0.63
Cost of equity 6.2% 8.3%
Cost of debt 4.0% 4.5%
Tax rate 12.2% 19.0%
Debt/Equity ratio 0.33 0.33
After-tax WACC 5.6% 7.1%

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

Key Projections:

  • Revenue growth from $5,606 (FY12-2024) to $12,241 (FY12-2034)
  • Net profit margin expansion from 12% to 13%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $60 $17,521M 82.3%
10-Year Growth $82 $22,923M 70.1%
5-Year EBITDA $42 $13,127M 76.4%
10-Year EBITDA $59 $17,330M 60.5%

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: 47.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.3%
  • Long-term growth rate: 2.0%
  • Fair value: $63.21 (35.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.3% (Low) to 6.2% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $24 to $69
  • Selected fair value: $46.42 (-0.7% 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 $871M
Discount Rate (WACC) 7.1% - 5.6%
Enterprise Value $12,246M - $15,644M
Net Debt $2,851M
Equity Value $9,395M - $12,793M
Outstanding Shares 245M
Fair Value $38 - $52
Selected Fair Value $45.29

Key Financial Metrics

Metric Value
Market Capitalization $11450M
Enterprise Value $14301M
Trailing P/E 18.80
Forward P/E 15.40
Trailing EV/EBITDA 8.70
Current Dividend Yield 253.80%
Dividend Growth Rate (5Y) 2.40%
Debt-to-Equity Ratio 0.33

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% $24.58
Discounted Cash Flow (5Y) 25% $14.97
Dividend Discount Model (Multi-Stage) 20% $12.64
Dividend Discount Model (Stable) 15% $6.96
Earnings Power Value 10% $4.53
Weighted Average 100% $63.69

Investment Conclusion

Based on our comprehensive valuation analysis, Accor SA's weighted average intrinsic value is $63.69, which is approximately 36.3% above the current market price of $46.74.

Key investment considerations:

  • Strong projected earnings growth (12% to 13% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 2.40%

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