What is ATC's Intrinsic value?

Atotech Ltd (ATC) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Atotech Ltd's estimated intrinsic value ranges from $10.59 to $28.26 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $28.26 +24.4%
Discounted Cash Flow (5Y) $21.75 -4.2%
Dividend Discount Model (Multi-Stage) $10.59 -53.4%
Dividend Discount Model (Stable) $11.15 -50.9%
Earnings Power Value $21.46 -5.5%

Is Atotech Ltd (ATC) undervalued or overvalued?

With the current market price at $22.71, the stock appears to be moderately 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 Atotech Ltd'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 1.18
Cost of equity 8.5% 11.5%
Cost of debt 5.4% 6.1%
Tax rate 26.2% 27.0%
Debt/Equity ratio 0.37 0.37
After-tax WACC 7.3% 9.6%

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: 8.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,499 (FY12-2021) to $2,332 (FY12-2031)
  • Net profit margin expansion from 1% to 14%
  • Capital expenditures maintained at approximately 5% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $22 $5,473M 82.5%
10-Year Growth $28 $6,740M 69.0%
5-Year EBITDA $11 $3,401M 71.8%
10-Year EBITDA $17 $4,481M 53.4%

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: 10.0%
  • Long-term growth rate: 4.0%
  • Fair value: $10.59 (-53.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.5% (Low) to 8.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $5 to $17
  • Selected fair value: $11.15 (-50.9% 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 $447M
Discount Rate (WACC) 9.6% - 7.3%
Enterprise Value $4,671M - $6,159M
Net Debt $1,237M
Equity Value $3,434M - $4,923M
Outstanding Shares 195M
Fair Value $18 - $25
Selected Fair Value $21.46

Key Financial Metrics

Metric Value
Market Capitalization $4422M
Enterprise Value $5659M
Trailing P/E 34.85
Forward P/E 49.56
Trailing EV/EBITDA 7.90
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.37

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) 30% $8.48
Discounted Cash Flow (5Y) 25% $5.44
Dividend Discount Model (Multi-Stage) 20% $2.12
Dividend Discount Model (Stable) 15% $1.67
Earnings Power Value 10% $2.15
Weighted Average 100% $19.85

Investment Conclusion

Based on our comprehensive valuation analysis, Atotech Ltd's weighted average intrinsic value is $19.85, which is approximately 12.6% below the current market price of $22.71.

Key investment considerations:

  • Strong projected earnings growth (1% to 14% margin)
  • Consistent cash flow generation

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