What is BAYN.DE's Intrinsic value?

Bayer AG (BAYN.DE) Intrinsic Value Analysis

Executive Summary

As of October 1, 2025, Bayer AG's estimated intrinsic value ranges from $11.07 to $120.86 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $38.59 +36.7%
Discounted Cash Flow (5Y) $24.02 -14.9%
Dividend Discount Model (Multi-Stage) $11.07 -60.8%
Earnings Power Value $120.86 +328.1%

Is Bayer AG (BAYN.DE) undervalued or overvalued?

With the current market price at $28.23, 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 Bayer AG'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 2.8% 3.3%
Equity market risk premium 5.1% 6.1%
Adjusted beta 1.43 1.64
Cost of equity 10.1% 13.8%
Cost of debt 4.0% 7.0%
Tax rate 10.4% 26.5%
Debt/Equity ratio 1.51 1.51
After-tax WACC 6.2% 8.6%

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: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $46,606 (FY12-2024) to $58,525 (FY12-2034)
  • Net profit margin expansion from -5% to 6%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $24 $57,467M 85.7%
10-Year Growth $39 $71,777M 71.4%
5-Year EBITDA $12 $45,301M 81.8%
10-Year EBITDA $25 $57,953M 64.6%

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: 11.9%
  • Long-term growth rate: 3.0%
  • Fair value: $11.07 (-60.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 13.8% (Low) to 10.1% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $(21) to $(52)
  • Selected fair value: $-36.14 (-228.0% 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 $10,961M
Discount Rate (WACC) 8.6% - 6.2%
Enterprise Value $127,577M - $177,631M
Net Debt $33,870M
Equity Value $93,707M - $143,761M
Outstanding Shares 982M
Fair Value $95 - $146
Selected Fair Value $120.86

Key Financial Metrics

Metric Value
Market Capitalization $27734M
Enterprise Value $61604M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 8.65
Current Dividend Yield 46.64%
Dividend Growth Rate (5Y) -53.36%
Debt-to-Equity Ratio 1.51

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) 35% $11.58
Discounted Cash Flow (5Y) 29% $6.00
Dividend Discount Model (Multi-Stage) 24% $2.21
Earnings Power Value 12% $12.09
Weighted Average 100% $37.51

Investment Conclusion

Based on our comprehensive valuation analysis, Bayer AG's intrinsic value is $37.51, which is approximately 32.9% above the current market price of $28.23.

Key investment considerations:

  • Strong projected earnings growth (-5% to 6% margin)
  • Consistent cash flow generation

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