What is BRKS's Intrinsic value?

Brooks Automation Inc (BRKS) Intrinsic Value Analysis

Executive Summary

As of June 16, 2025, Brooks Automation Inc's estimated intrinsic value ranges from $1.95 to $16.45 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $1.95 -98.3%
Dividend Discount Model (Stable) $16.45 -85.5%
Earnings Power Value $10.35 -90.8%

Is Brooks Automation Inc (BRKS) undervalued or overvalued?

With the current market price at $113.10, 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 Brooks Automation 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 1.13 1.2
Cost of equity 7.9% 10.5%
Cost of debt 4.0% 4.5%
Tax rate 27.0% 27.0%
Debt/Equity ratio 0.01 0.01
After-tax WACC 7.9% 10.4%

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: 48.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.2%
  • Long-term growth rate: 4.0%
  • Fair value: $1.95 (-98.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.5% (Low) to 7.9% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $8 to $25
  • Selected fair value: $16.45 (-85.5% 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 $53M
Discount Rate (WACC) 10.4% - 7.9%
Enterprise Value $512M - $673M
Net Debt $(177)M
Equity Value $689M - $850M
Outstanding Shares 74M
Fair Value $9 - $11
Selected Fair Value $10.35

Key Financial Metrics

Metric Value
Market Capitalization $8409M
Enterprise Value $8232M
Trailing P/E 42.13
Forward P/E 137.40
Trailing EV/EBITDA 13.55
Current Dividend Yield 35.35%
Dividend Growth Rate (5Y) 1.57%
Debt-to-Equity Ratio 0.01

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% $0.39
Dividend Discount Model (Stable) 33% $2.47
Earnings Power Value 22% $1.04
Weighted Average 100% $8.65

Investment Conclusion

Based on our comprehensive valuation analysis, Brooks Automation Inc's weighted average intrinsic value is $8.65, which is approximately 92.4% below the current market price of $113.10.

Key investment considerations:

  • Strong projected earnings growth (-6% to 3% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.01)
  • Historical dividend growth of 1.57%

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