What is BCEI's Intrinsic value?

Bonanza Creek Energy Inc (BCEI) Intrinsic Value Analysis

Executive Summary

As of May 24, 2025, Bonanza Creek Energy Inc's estimated intrinsic value ranges from $14.61 to $243.84 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $243.84 +334.7%
Dividend Discount Model (Stable) $31.81 -43.3%
Earnings Power Value $14.61 -74.0%

Is Bonanza Creek Energy Inc (BCEI) undervalued or overvalued?

With the current market price at $56.10, 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 Bonanza Creek Energy Inc'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 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 0.93 1.45
Cost of equity 7.1% 11.8%
Cost of debt 4.0% 4.5%
Tax rate 27.0% 27.0%
Debt/Equity ratio 0 0
After-tax WACC 7.1% 11.8%

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: 9.4%
  • Long-term growth rate: 4.0%
  • Fair value: $243.84 (334.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.8% (Low) to 7.1% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $10 to $54
  • Selected fair value: $31.81 (-43.3% 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 $55M
Discount Rate (WACC) 11.8% - 7.1%
Enterprise Value $470M - $781M
Net Debt $175M
Equity Value $296M - $606M
Outstanding Shares 31M
Fair Value $10 - $20
Selected Fair Value $14.61

Key Financial Metrics

Metric Value
Market Capitalization $1732M
Enterprise Value $1906M
Trailing P/E 45.01
Forward P/E 11.47
Trailing EV/EBITDA 6.65
Current Dividend Yield 61.31%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.00

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) 44% $48.77
Dividend Discount Model (Stable) 33% $4.77
Earnings Power Value 22% $1.46
Weighted Average 100% $122.22

Investment Conclusion

Based on our comprehensive valuation analysis, Bonanza Creek Energy Inc's weighted average intrinsic value is $122.22, which is approximately 117.9% above the current market price of $56.10.

Key investment considerations:

  • Strong projected earnings growth (47% to 18% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.00)

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