What is ARNC's Intrinsic value?

Arconic Corp (PITTSBURGH) (ARNC) Intrinsic Value Analysis

Executive Summary

As of June 8, 2025, Arconic Corp (PITTSBURGH)'s estimated intrinsic value ranges from $44.66 to $99.85 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $99.85 +233.0%
Discounted Cash Flow (5Y) $74.96 +149.9%
Dividend Discount Model (Multi-Stage) $54.84 +82.9%
Earnings Power Value $44.66 +48.9%

Is Arconic Corp (PITTSBURGH) (ARNC) undervalued or overvalued?

With the current market price at $29.99, 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 Arconic Corp (PITTSBURGH)'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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 1.04 1.33
Cost of equity 8.7% 12.3%
Cost of debt 7.0% 18.8%
Tax rate 10.4% 19.7%
Debt/Equity ratio 0.53 0.53
After-tax WACC 7.8% 13.3%

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: 10.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $8,961 (FY12-2022) to $11,567 (FY12-2032)
  • Net profit margin expansion from -2% to 6%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $31 $4,493M 78.1%
10-Year Growth $45 $5,882M 57.3%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.5%
  • Long-term growth rate: 3.0%
  • Fair value: $54.84 (82.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.3% (Low) to 8.7% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $(17) to $(49)
  • Selected fair value: $0.00 (-100.0% 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 $573M
Discount Rate (WACC) 13.3% - 7.8%
Enterprise Value $4,318M - $7,309M
Net Debt $1,332M
Equity Value $2,986M - $5,977M
Outstanding Shares 100M
Fair Value $30 - $60
Selected Fair Value $44.66

Key Financial Metrics

Metric Value
Market Capitalization $3009M
Enterprise Value $4341M
Trailing P/E 0.00
Forward P/E -11.80
Trailing EV/EBITDA 8.90
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.53

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) 35% $29.96
Discounted Cash Flow (5Y) 29% $18.74
Dividend Discount Model (Multi-Stage) 24% $10.97
Earnings Power Value 12% $4.47
Weighted Average 100% $75.45

Investment Conclusion

Based on our comprehensive valuation analysis, Arconic Corp (PITTSBURGH)'s weighted average intrinsic value is $75.45, which is approximately 151.6% above the current market price of $29.99.

Key investment considerations:

  • Strong projected earnings growth (-2% to 6% margin)
  • Consistent cash flow generation

Given these factors, we believe Arconic Corp (PITTSBURGH) is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.