What is AT.TO's Intrinsic value?

AcuityAds Holdings Inc (AT.TO) Intrinsic Value Analysis

Executive Summary

As of May 28, 2025, AcuityAds Holdings Inc's estimated intrinsic value ranges from $4.00 to $6.26 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $4.59 +82.8%
Dividend Discount Model (Multi-Stage) $6.26 +149.6%
Earnings Power Value $4.00 +59.4%

Is AcuityAds Holdings Inc (AT.TO) undervalued or overvalued?

With the current market price at $2.51, 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 AcuityAds Holdings Inc'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 3.6% 4.1%
Equity market risk premium 5.5% 6.5%
Adjusted beta 0.34 0.44
Cost of equity 5.4% 7.5%
Cost of debt 4.5% 7.0%
Tax rate 25.9% 26.5%
Debt/Equity ratio 0.08 0.08
After-tax WACC 5.3% 7.3%

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: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $121 (FY12-2022) to $263 (FY12-2032)
  • Net profit margin expansion from -1% to 10%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $(62)M 79.7%
10-Year Growth $5 $200M 96.4%
5-Year EBITDA $2 $64M 119.7%
10-Year EBITDA $3 $128M 94.3%

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: 6.4%
  • Long-term growth rate: 4.0%
  • Fair value: $6.26 (149.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.5% (Low) to 5.4% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(0) to $(3)
  • Selected fair value: $-1.47 (-158.5% 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 $10M
Discount Rate (WACC) 7.3% - 5.3%
Enterprise Value $140M - $194M
Net Debt $(60)M
Equity Value $201M - $254M
Outstanding Shares 57M
Fair Value $4 - $4
Selected Fair Value $4.00

Key Financial Metrics

Metric Value
Market Capitalization $143M
Enterprise Value $82M
Trailing P/E 0.00
Forward P/E 57.28
Trailing EV/EBITDA 8.80
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.08

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) 50% $1.38
Dividend Discount Model (Multi-Stage) 33% $1.25
Earnings Power Value 17% $0.40
Weighted Average 100% $5.05

Investment Conclusion

Based on our comprehensive valuation analysis, AcuityAds Holdings Inc's weighted average intrinsic value is $5.05, which is approximately 101.1% above the current market price of $2.51.

Key investment considerations:

  • Strong projected earnings growth (-1% to 10% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

Given these factors, we believe AcuityAds Holdings Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.