What is COMM's Intrinsic value?

CommScope Holding Company Inc (COMM) Intrinsic Value Analysis

Executive Summary

As of June 7, 2025, CommScope Holding Company Inc's estimated intrinsic value ranges from $12.93 to $39.25 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $12.93 +113.4%
Earnings Power Value $39.25 +547.7%

Is CommScope Holding Company Inc (COMM) undervalued or overvalued?

With the current market price at $6.06, 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 CommScope Holding Company 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 4.04 6.7
Cost of equity 22.4% 42.4%
Cost of debt 6.3% 15.6%
Tax rate 11.3% 12.5%
Debt/Equity ratio 7.04 7.04
After-tax WACC 7.7% 17.3%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 32.4%
  • Long-term growth rate: 3.5%
  • Fair value: $-1.78 (-129.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 42.4% (Low) to 22.4% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $7 to $19
  • Selected fair value: $12.93 (113.4% 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 $1,626M
Discount Rate (WACC) 17.3% - 7.7%
Enterprise Value $9,418M - $21,089M
Net Debt $6,751M
Equity Value $2,666M - $14,337M
Outstanding Shares 217M
Fair Value $12 - $66
Selected Fair Value $39.25

Key Financial Metrics

Metric Value
Market Capitalization $1313M
Enterprise Value $8064M
Trailing P/E 1.59
Forward P/E 1.59
Trailing EV/EBITDA 17.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 7.04

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 (Stable) 60% $1.94
Earnings Power Value 40% $3.93
Weighted Average 100% $23.46

Investment Conclusion

Based on our comprehensive valuation analysis, CommScope Holding Company Inc's weighted average intrinsic value is $23.46, which is approximately 287.1% above the current market price of $6.06.

Key investment considerations:

  • Strong projected earnings growth (-11% to -3% margin)
  • Consistent cash flow generation

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