What is BN.PA's Intrinsic value?

Danone SA (BN.PA) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Danone SA's estimated intrinsic value ranges from $53.59 to $69.95 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $69.95 -6.3%
Discounted Cash Flow (5Y) $63.85 -14.5%
Dividend Discount Model (Multi-Stage) $55.58 -25.6%
Dividend Discount Model (Stable) $56.63 -24.2%
Earnings Power Value $53.59 -28.2%

Is Danone SA (BN.PA) undervalued or overvalued?

With the current market price at $74.68, the stock appears to be moderately overvalued.

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 Danone SA'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 3.0% 3.5%
Equity market risk premium 5.8% 6.8%
Adjusted beta 0.55 0.58
Cost of equity 6.2% 7.9%
Cost of debt 4.0% 4.5%
Tax rate 30.8% 35.6%
Debt/Equity ratio 0.28 0.28
After-tax WACC 5.5% 6.8%

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: 6.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $27,376 (FY12-2024) to $38,901 (FY12-2034)
  • Net profit margin expansion from 8% to 8%
  • Capital expenditures maintained at approximately 4% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $64 $56,134M 82.0%
10-Year Growth $70 $60,276M 67.8%
5-Year EBITDA $41 $40,493M 75.1%
10-Year EBITDA $49 $46,254M 58.0%

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: 66.7%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.1%
  • Long-term growth rate: 2.0%
  • Fair value: $55.58 (-25.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.9% (Low) to 6.2% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $30 to $83
  • Selected fair value: $56.63 (-24.2% 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 $2,985M
Discount Rate (WACC) 6.8% - 5.5%
Enterprise Value $43,716M - $54,605M
Net Debt $12,745M
Equity Value $30,971M - $41,860M
Outstanding Shares 680M
Fair Value $46 - $62
Selected Fair Value $53.59

Key Financial Metrics

Metric Value
Market Capitalization $50749M
Enterprise Value $63494M
Trailing P/E 25.11
Forward P/E 23.36
Trailing EV/EBITDA 8.60
Current Dividend Yield 263.65%
Dividend Growth Rate (5Y) -0.28%
Debt-to-Equity Ratio 0.28

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) 30% $20.98
Discounted Cash Flow (5Y) 25% $15.96
Dividend Discount Model (Multi-Stage) 20% $11.12
Dividend Discount Model (Stable) 15% $8.50
Earnings Power Value 10% $5.36
Weighted Average 100% $61.92

Investment Conclusion

Based on our comprehensive valuation analysis, Danone SA's weighted average intrinsic value is $61.92, which is approximately 17.1% below the current market price of $74.68.

Key investment considerations:

  • Strong projected earnings growth (8% to 8% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.28)

Given these factors, we believe Danone SA is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.