What is ACB.TO's Intrinsic value?

Aurora Cannabis Inc (ACB.TO) Intrinsic Value Analysis

Executive Summary

As of June 13, 2025, Aurora Cannabis Inc's estimated intrinsic value ranges from $11.52 to $11.52 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $11.52 +39.6%

Is Aurora Cannabis Inc (ACB.TO) undervalued or overvalued?

With the current market price at $8.25, 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 Aurora Cannabis Inc's intrinsic value, including:

  1. 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 0.56 0.61
Cost of equity 6.0% 7.9%
Cost of debt 6.2% 7.0%
Tax rate 0.9% 1.5%
Debt/Equity ratio 0.24 0.24
After-tax WACC 6.1% 7.7%

Valuation Methods

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: 7.0%
  • Long-term growth rate: 4.0%
  • Fair value: $-4.45 (-154.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.9% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $3 to $20
  • Selected fair value: $11.52 (39.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $453M
Enterprise Value $445M
Trailing P/E 36.25
Forward P/E 36.25
Trailing EV/EBITDA 6.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.24

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
Dividend Discount Model (Stable) 100% $1.73
Weighted Average 100% $11.52

Investment Conclusion

Based on our comprehensive valuation analysis, Aurora Cannabis Inc's weighted average intrinsic value is $11.52, which is approximately 39.6% above the current market price of $8.25.

Key investment considerations:

  • Strong projected earnings growth (-22% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.24)

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