What is ADS.DE's Intrinsic value?

Adidas AG (ADS.DE) Intrinsic Value Analysis

Executive Summary

As of April 1, 2026, Adidas AG's estimated intrinsic value ranges from $86.37 to $169.54 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $169.54 +24.1%
Discounted Cash Flow (5Y) $137.07 +0.3%
Dividend Discount Model (Multi-Stage) $115.69 -15.3%
Dividend Discount Model (Stable) $139.51 +2.1%
Earnings Power Value $86.37 -36.8%

Is Adidas AG (ADS.DE) undervalued or overvalued?

With the current market price at $136.65, the stock appears to be fairly valued.

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 Adidas AG'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 2.8% 3.3%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.85 1.06
Cost of equity 7.1% 10.3%
Cost of debt 4.0% 4.5%
Tax rate 25.6% 29.7%
Debt/Equity ratio 0.23 0.23
After-tax WACC 6.3% 8.9%

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: 7.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $24,811 (FY12-2025) to $44,257 (FY12-2035)
  • Net profit margin expansion from 6% to 5%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $137 $28,610M 77.7%
10-Year Growth $170 $34,454M 65.2%
5-Year EBITDA $130 $27,409M 76.7%
10-Year EBITDA $155 $31,864M 62.3%

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: 26.7%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 3.0%
  • Fair value: $115.69 (-15.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 7.1% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $63 to $216
  • Selected fair value: $139.51 (2.1% 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 $1,441M
Discount Rate (WACC) 8.9% - 6.3%
Enterprise Value $16,158M - $22,809M
Net Debt $3,937M
Equity Value $12,221M - $18,872M
Outstanding Shares 180M
Fair Value $68 - $105
Selected Fair Value $86.37

Key Financial Metrics

Metric Value
Market Capitalization $24597M
Enterprise Value $28534M
Trailing P/E 18.37
Forward P/E 17.52
Trailing EV/EBITDA 9.30
Current Dividend Yield 150.20%
Dividend Growth Rate (5Y) -11.62%
Debt-to-Equity Ratio 0.23

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% $50.86
Discounted Cash Flow (5Y) 25% $34.27
Dividend Discount Model (Multi-Stage) 20% $23.14
Dividend Discount Model (Stable) 15% $20.93
Earnings Power Value 10% $8.64
Weighted Average 100% $137.83

Investment Conclusion

Based on our comprehensive valuation analysis, Adidas AG's intrinsic value is $137.83, which is approximately 0.9% above the current market price of $136.65.

Key investment considerations:

  • Strong projected earnings growth (6% to 5% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.23)

Given these factors, we believe Adidas AG is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.