What is CLI.L's Intrinsic value?

CLS Holdings PLC (CLI.L) Intrinsic Value Analysis

Executive Summary

As of May 24, 2025, CLS Holdings PLC's estimated intrinsic value ranges from $89.08 to $107.69 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $103.18 +65.1%
Discounted Cash Flow (5Y) $89.08 +42.5%
Earnings Power Value $107.69 +72.3%

Is CLS Holdings PLC (CLI.L) undervalued or overvalued?

With the current market price at $62.50, 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 CLS Holdings PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 1.03 1.14
Cost of equity 10.2% 13.0%
Cost of debt 4.0% 9.2%
Tax rate 4.7% 11.0%
Debt/Equity ratio 4.07 4.07
After-tax WACC 5.1% 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: 7.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $152 (FY12-2024) to $169 (FY12-2034)
  • Net profit margin expansion from -62% to -61%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $89 $1,295M 74.5%
10-Year Growth $103 $1,351M 55.9%
5-Year EBITDA $77 $1,249M 73.6%
10-Year EBITDA $94 $1,317M 54.7%

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 $89M
Discount Rate (WACC) 9.2% - 5.1%
Enterprise Value $976M - $1,762M
Net Debt $942M
Equity Value $34M - $820M
Outstanding Shares 4M
Fair Value $9 - $207
Selected Fair Value $107.69

Key Financial Metrics

Metric Value
Market Capitalization $248M
Enterprise Value $1190M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 16.55
Current Dividend Yield 1282.50%
Dividend Growth Rate (5Y) 1.22%
Debt-to-Equity Ratio 4.07

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) 46% $30.95
Discounted Cash Flow (5Y) 38% $22.27
Earnings Power Value 15% $10.77
Weighted Average 100% $98.45

Investment Conclusion

Based on our comprehensive valuation analysis, CLS Holdings PLC's weighted average intrinsic value is $98.45, which is approximately 57.5% above the current market price of $62.50.

Key investment considerations:

  • Strong projected earnings growth (-62% to -61% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 1.22%

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