What is AV.L's Intrinsic value?

Aviva PLC (AV.L) Intrinsic Value Analysis

Executive Summary

As of May 31, 2025, Aviva PLC's estimated intrinsic value ranges from $352.82 to $385.70 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $385.70 -36.8%
Dividend Discount Model (Stable) $352.82 -42.2%

Is Aviva PLC (AV.L) undervalued or overvalued?

With the current market price at $610.60, 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 Aviva PLC's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

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 0.94 1
Cost of equity 9.6% 12.0%
Cost of debt 5.0% 5.0%
Tax rate 40.4% 48.2%
Debt/Equity ratio 0.43 0.43
After-tax WACC 7.6% 9.2%

Valuation Methods

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: 128.7%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.8%
  • Long-term growth rate: 4.0%
  • Fair value: $385.70 (-36.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.0% (Low) to 9.6% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $202 to $504
  • Selected fair value: $352.82 (-42.2% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $16173M
Enterprise Value $-422M
Trailing P/E 23.64
Forward P/E 22.46
Trailing EV/EBITDA 0.00
Current Dividend Yield 543.95%
Dividend Growth Rate (5Y) 38.76%
Debt-to-Equity Ratio 0.43

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
Dividend Discount Model (Multi-Stage) 57% $77.14
Dividend Discount Model (Stable) 43% $52.92
Weighted Average 100% $371.61

Investment Conclusion

Based on our comprehensive valuation analysis, Aviva PLC's weighted average intrinsic value is $371.61, which is approximately 39.1% below the current market price of $610.60.

Key investment considerations:

  • Historical dividend growth of 38.76%

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