As of June 8, 2025, Babcock International Group PLC's estimated intrinsic value ranges from $600.20 to $1548.75 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $1069.33 | +1.2% |
| Discounted Cash Flow (5Y) | $949.48 | -10.2% |
| Dividend Discount Model (Multi-Stage) | $741.66 | -29.8% |
| Dividend Discount Model (Stable) | $600.20 | -43.2% |
| Earnings Power Value | $1548.75 | +46.5% |
Is Babcock International Group PLC (BAB.L) undervalued or overvalued?
With the current market price at $1057.00, the stock appears to be fairly valued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Babcock International Group PLC's intrinsic value, including:
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 | 0.75 | 0.93 |
| Cost of equity | 8.5% | 11.5% |
| Cost of debt | 4.0% | 5.2% |
| Tax rate | 16.6% | 25.5% |
| Debt/Equity ratio | 0.21 | 0.21 |
| After-tax WACC | 7.6% | 10.1% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $949 | $4,551M | 78.2% |
| 10-Year Growth | $1,069 | $5,079M | 59.8% |
| 5-Year EBITDA | $641 | $3,195M | 69.0% |
| 10-Year EBITDA | $778 | $3,796M | 46.2% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $623M |
| Discount Rate (WACC) | 10.1% - 7.6% |
| Enterprise Value | $6,150M - $8,225M |
| Net Debt | $375M |
| Equity Value | $5,775M - $7,850M |
| Outstanding Shares | 4M |
| Fair Value | $1,313 - $1,785 |
| Selected Fair Value | $1548.75 |
| Metric | Value |
|---|---|
| Market Capitalization | $4649M |
| Enterprise Value | $5024M |
| Trailing P/E | 24.15 |
| Forward P/E | 22.35 |
| Trailing EV/EBITDA | 5.20 |
| Current Dividend Yield | 53.99% |
| Dividend Growth Rate (5Y) | -51.38% |
| Debt-to-Equity Ratio | 0.21 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $320.80 |
| Discounted Cash Flow (5Y) | 25% | $237.37 |
| Dividend Discount Model (Multi-Stage) | 20% | $148.33 |
| Dividend Discount Model (Stable) | 15% | $90.03 |
| Earnings Power Value | 10% | $154.88 |
| Weighted Average | 100% | $951.41 |
Based on our comprehensive valuation analysis, Babcock International Group PLC's weighted average intrinsic value is $951.41, which is approximately 10.0% below the current market price of $1057.00.
Key investment considerations:
Given these factors, we believe Babcock International Group PLC is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.