What is APH.L's Intrinsic value?

Alliance Pharma PLC (APH.L) Intrinsic Value Analysis

Executive Summary

As of August 12, 2025, Alliance Pharma PLC's estimated intrinsic value ranges from $16.36 to $99.33 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $38.40 -40.7%
Discounted Cash Flow (5Y) $16.36 -74.7%
Earnings Power Value $99.33 +53.5%

Is Alliance Pharma PLC (APH.L) undervalued or overvalued?

With the current market price at $64.70, the stock appears to be significantly overvalued.

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 Alliance Pharma PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.45 0.59
Cost of equity 6.7% 9.1%
Cost of debt 5.1% 6.2%
Tax rate 29.6% 34.6%
Debt/Equity ratio 0.27 0.27
After-tax WACC 6.0% 8.1%

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: 7.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $179 (FY12-2024) to $318 (FY12-2034)
  • Net profit margin expansion from -6% to 1%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $16 $153M 97.5%
10-Year Growth $38 $275M 84.7%
5-Year EBITDA $(1,234) $47M 91.9%
10-Year EBITDA $7 $102M 58.8%

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 $42M
Discount Rate (WACC) 8.1% - 6.0%
Enterprise Value $522M - $697M
Net Debt $63M
Equity Value $459M - $634M
Outstanding Shares 6M
Fair Value $83 - $115
Selected Fair Value $99.33

Key Financial Metrics

Metric Value
Market Capitalization $356M
Enterprise Value $419M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 4.85
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.27

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% $11.52
Discounted Cash Flow (5Y) 38% $4.09
Earnings Power Value 15% $9.93
Weighted Average 100% $39.30

Investment Conclusion

Based on our comprehensive valuation analysis, Alliance Pharma PLC's intrinsic value is $39.30, which is approximately 39.3% below the current market price of $64.70.

Key investment considerations:

  • Strong projected earnings growth (-6% to 1% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.27)

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