What is AVV.L's Intrinsic value?

AVEVA Group PLC (AVV.L) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, AVEVA Group PLC's estimated intrinsic value ranges from $156.72 to $1003.83 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $156.72 -95.1%
Earnings Power Value $1003.83 -68.8%

Is AVEVA Group PLC (AVV.L) undervalued or overvalued?

With the current market price at $3219.00, 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 AVEVA Group PLC's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  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 0.42 0.73
Cost of equity 6.5% 10.1%
Cost of debt 7.1% 7.1%
Tax rate 26.1% 27.5%
Debt/Equity ratio 0.08 0.08
After-tax WACC 6.4% 9.7%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.3%
  • Long-term growth rate: 4.0%
  • Fair value: $156.72 (-95.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.1% (Low) to 6.5% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(199) to $(1,187)
  • Selected fair value: $-693.10 (-121.5% 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 $291M
Discount Rate (WACC) 9.7% - 6.4%
Enterprise Value $2,990M - $4,516M
Net Debt $708M
Equity Value $2,282M - $3,808M
Outstanding Shares 3M
Fair Value $752 - $1,255
Selected Fair Value $1003.83

Key Financial Metrics

Metric Value
Market Capitalization $9764M
Enterprise Value $10472M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 9.05
Current Dividend Yield 115.83%
Dividend Growth Rate (5Y) 2.41%
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
Dividend Discount Model (Multi-Stage) 67% $31.34
Earnings Power Value 33% $100.38
Weighted Average 100% $439.09

Investment Conclusion

Based on our comprehensive valuation analysis, AVEVA Group PLC's weighted average intrinsic value is $439.09, which is approximately 86.4% below the current market price of $3219.00.

Key investment considerations:

  • Strong projected earnings growth (-5% to 3% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)
  • Historical dividend growth of 2.41%

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