What is BRG.WA's Intrinsic value?

Berling SA (BRG.WA) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, Berling SA's estimated intrinsic value ranges from $3.68 to $7.72 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $4.17 -40.0%
Discounted Cash Flow (5Y) $3.68 -47.0%
Dividend Discount Model (Multi-Stage) $4.97 -28.5%
Dividend Discount Model (Stable) $3.77 -45.7%
Earnings Power Value $7.72 +11.1%

Is Berling SA (BRG.WA) undervalued or overvalued?

With the current market price at $6.95, the stock appears to be significantly 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 Berling 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 5.5% 6.0%
Equity market risk premium 6.3% 7.3%
Adjusted beta 0.32 0.36
Cost of equity 7.6% 9.2%
Cost of debt 6.2% 12.0%
Tax rate 19.2% 19.3%
Debt/Equity ratio 0.08 0.08
After-tax WACC 7.4% 9.2%

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: 8.3% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $76 (FY12-2022) to $126 (FY12-2032)
  • Net profit margin expansion from 9% to 9%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $4 $68M 59.8%
10-Year Growth $4 $77M 47.4%
5-Year EBITDA $5 $100M 72.6%
10-Year EBITDA $6 $108M 62.8%

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: 8.4%
  • Long-term growth rate: 2.0%
  • Fair value: $4.97 (-28.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.2% (Low) to 7.6% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $2 to $5
  • Selected fair value: $3.77 (-45.7% 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 $11M
Discount Rate (WACC) 9.2% - 7.4%
Enterprise Value $123M - $154M
Net Debt $3M
Equity Value $120M - $151M
Outstanding Shares 18M
Fair Value $7 - $9
Selected Fair Value $7.72

Key Financial Metrics

Metric Value
Market Capitalization $122M
Enterprise Value $125M
Trailing P/E 26.12
Forward P/E 19.17
Trailing EV/EBITDA 10.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -24.97%
Debt-to-Equity Ratio 0.08

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% $1.25
Discounted Cash Flow (5Y) 25% $0.92
Dividend Discount Model (Multi-Stage) 20% $0.99
Dividend Discount Model (Stable) 15% $0.57
Earnings Power Value 10% $0.77
Weighted Average 100% $4.50

Investment Conclusion

Based on our comprehensive valuation analysis, Berling SA's weighted average intrinsic value is $4.50, which is approximately 35.2% below the current market price of $6.95.

Key investment considerations:

  • Strong projected earnings growth (9% to 9% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.08)

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