What is AFHP.L's Intrinsic value?

AFH Financial Group PLC (AFHP.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, AFH Financial Group PLC's estimated intrinsic value ranges from $434.35 to $551.13 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $434.35 -8.6%
Dividend Discount Model (Stable) $551.13 +16.0%

Is AFH Financial Group PLC (AFHP.L) undervalued or overvalued?

With the current market price at $475.00, 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 AFH Financial Group PLC'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 2.9% 3.4%
Equity market risk premium 5.3% 6.3%
Adjusted beta 0.86 1.01
Cost of equity 7.5% 10.3%
Cost of debt 5.0% 5.0%
Tax rate 18.1% 19.6%
Debt/Equity ratio 0.15 0.15
After-tax WACC 7.1% 9.5%

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: 25.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 1.0%
  • Fair value: $434.35 (-8.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 7.5% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $356 to $746
  • Selected fair value: $551.13 (16.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $205M
Enterprise Value $222M
Trailing P/E 9.52
Forward P/E 16.33
Trailing EV/EBITDA 0.00
Current Dividend Yield 265.04%
Dividend Growth Rate (5Y) 49.78%
Debt-to-Equity Ratio 0.15

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 (Multi-Stage) 57% $86.87
Dividend Discount Model (Stable) 43% $82.67
Weighted Average 100% $484.40

Investment Conclusion

Based on our comprehensive valuation analysis, AFH Financial Group PLC's weighted average intrinsic value is $484.40, which is approximately 2.0% above the current market price of $475.00.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.15)
  • Historical dividend growth of 49.78%

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