What is DII.B.TO's Intrinsic value?

Dorel Industries Inc (DII.B.TO) Intrinsic Value Analysis

Executive Summary

As of June 12, 2025, Dorel Industries Inc's estimated intrinsic value ranges from $6.77 to $6.77 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $6.77 +366.8%

Is Dorel Industries Inc (DII.B.TO) undervalued or overvalued?

With the current market price at $1.45, 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 Dorel Industries Inc's intrinsic value, including:

  1. 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 5.1% 6.1%
Adjusted beta 5.42 6.88
Cost of equity 30.8% 46.1%
Cost of debt 5.4% 7.0%
Tax rate 25.9% 26.5%
Debt/Equity ratio 10.92 10.92
After-tax WACC 6.2% 8.6%

Valuation Methods

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 $37M
Discount Rate (WACC) 8.6% - 6.2%
Enterprise Value $436M - $600M
Net Debt $357M
Equity Value $79M - $243M
Outstanding Shares 33M
Fair Value $2 - $7
Selected Fair Value $6.77

Key Financial Metrics

Metric Value
Market Capitalization $47M
Enterprise Value $536M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 6.90
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 10.92

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
Earnings Power Value 100% $0.68
Weighted Average 100% $6.77

Investment Conclusion

Based on our comprehensive valuation analysis, Dorel Industries Inc's weighted average intrinsic value is $6.77, which is approximately 366.8% above the current market price of $1.45.

Key investment considerations:

  • Strong projected earnings growth (-12% to -1% margin)
  • Consistent cash flow generation

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