ALM Equity AB (ALM.ST) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, ALM Equity AB's estimated intrinsic value ranges from $49.10 to $336.69 per share, depending on the valuation methodology applied.

Valuation Method	Fair Value (USD)	Implied Upside/Downside
Discounted Cash Flow (10Y)	$61.49	-32.3%
Discounted Cash Flow (5Y)	$49.10	-45.9%
Earnings Power Value	$336.69	+270.8%

Is ALM Equity AB (ALM.ST) undervalued or overvalued?

With the current market price at $90.80, 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 ALM Equity AB'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	2.5%	3.0%
Equity market risk premium	5.1%	6.1%
Adjusted beta	0.41	0.5
Cost of equity	5.1%	7.1%
Cost of debt	5.2%	19.5%
Tax rate	1.0%	1.3%
Debt/Equity ratio	1.27	1.27
After-tax WACC	5.1%	13.9%

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: 9.5% (range: 0.0% - 9.3%)

Key Projections:

• Revenue growth from $3,127 (FY12-2024) to $3,584 (FY12-2034)
• Net profit margin expansion from -35% to -26%
• Capital expenditures maintained at approximately 1% of revenue

DCF Model	Fair Value	Enterprise Value	% from Terminal Value
5-Year Growth	$49	$1,340M	117.3%
10-Year Growth	$61	$1,558M	78.5%
5-Year EBITDA	$46	$1,291M	117.9%
10-Year EBITDA	$73	$1,759M	81.0%

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	$481M
Discount Rate (WACC)	13.9% - 5.1%
Enterprise Value	$3,461M - $9,336M
Net Debt	$476M
Equity Value	$2,985M - $8,860M
Outstanding Shares	18M
Fair Value	$170 - $504
Selected Fair Value	$336.69

Key Financial Metrics

Metric	Value
Market Capitalization	$1597M
Enterprise Value	$2073M
Trailing P/E	0.00
Forward P/E	0.00
Trailing EV/EBITDA	12.45
Current Dividend Yield	797.64%
Dividend Growth Rate (5Y)	9.36%
Debt-to-Equity Ratio	1.27

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)	46%	$18.45
Discounted Cash Flow (5Y)	38%	$12.27
Earnings Power Value	15%	$33.67
Weighted Average	100%	$99.06

Investment Conclusion

Based on our comprehensive valuation analysis, ALM Equity AB's weighted average intrinsic value is $99.06, which is approximately 9.1% above the current market price of $90.80.

Key investment considerations:

• Strong projected earnings growth (-35% to -26% margin)
• Consistent cash flow generation
• Historical dividend growth of 9.36%

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