What is BKW.SW's Intrinsic value?

BKW AG (BKW.SW) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, BKW AG's estimated intrinsic value ranges from $199.05 to $263.32 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $263.32 +52.5%
Discounted Cash Flow (5Y) $244.68 +41.7%
Dividend Discount Model (Multi-Stage) $208.92 +21.0%
Dividend Discount Model (Stable) $199.05 +15.3%

Is BKW AG (BKW.SW) undervalued or overvalued?

With the current market price at $172.70, 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 BKW 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

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 1.0% 1.5%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.57 0.61
Cost of equity 5.4% 7.2%
Cost of debt 4.0% 4.5%
Tax rate 19.7% 21.5%
Debt/Equity ratio 0.2 0.2
After-tax WACC 5.0% 6.6%

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: 5.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,640 (FY12-2024) to $3,499 (FY12-2034)
  • Net profit margin expansion from 25% to 25%
  • Capital expenditures maintained at approximately 13% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $245 $13,957M 78.8%
10-Year Growth $263 $14,941M 63.3%
5-Year EBITDA $156 $9,271M 68.1%
10-Year EBITDA $186 $10,836M 49.4%

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: 31.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 6.3%
  • Long-term growth rate: 1.0%
  • Fair value: $208.92 (21.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.2% (Low) to 5.4% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $123 to $275
  • Selected fair value: $199.05 (15.3% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $9119M
Enterprise Value $10156M
Trailing P/E 14.66
Forward P/E 13.46
Trailing EV/EBITDA 6.35
Current Dividend Yield 215.76%
Dividend Growth Rate (5Y) 11.94%
Debt-to-Equity Ratio 0.20

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) 33% $79.00
Discounted Cash Flow (5Y) 28% $61.17
Dividend Discount Model (Multi-Stage) 22% $41.78
Dividend Discount Model (Stable) 17% $29.86
Weighted Average 100% $235.34

Investment Conclusion

Based on our comprehensive valuation analysis, BKW AG's weighted average intrinsic value is $235.34, which is approximately 36.3% above the current market price of $172.70.

Key investment considerations:

  • Strong projected earnings growth (25% to 25% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.20)
  • Historical dividend growth of 11.94%

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