What is BIOG.L's Intrinsic value?

Biotech Growth Trust PLC (BIOG.L) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Biotech Growth Trust PLC's estimated intrinsic value ranges from $4650.01 to $4650.01 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $4650.01 +540.5%

Is Biotech Growth Trust PLC (BIOG.L) undervalued or overvalued?

With the current market price at $726.00, 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 Biotech Growth Trust 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 4.0% 4.6%
Tax rate 0.1% 0.2%
Debt/Equity ratio 0.23 0.23
After-tax WACC 8.6% 10.6%

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: 10.8%
  • Long-term growth rate: 4.0%
  • Fair value: $-2783.77 (-483.4% 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: $2,671 to $6,629
  • Selected fair value: $4650.01 (540.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $205M
Enterprise Value $240M
Trailing P/E 2.12
Forward P/E 2.12
Trailing EV/EBITDA 5.35
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.23

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 (Stable) 100% $697.50
Weighted Average 100% $4650.01

Investment Conclusion

Based on our comprehensive valuation analysis, Biotech Growth Trust PLC's weighted average intrinsic value is $4650.01, which is approximately 540.5% above the current market price of $726.00.

Key investment considerations:

  • Strong projected earnings growth (94% to -9200% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.23)

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