What is DLAR.L's Intrinsic value?

De La Rue PLC (DLAR.L) Intrinsic Value Analysis

Executive Summary

As of May 25, 2025, De La Rue PLC's estimated intrinsic value ranges from $7.13 to $312.74 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $25.89 -79.9%
Discounted Cash Flow (5Y) $13.56 -89.4%
Dividend Discount Model (Multi-Stage) $7.13 -94.5%
Earnings Power Value $312.74 +143.4%

Is De La Rue PLC (DLAR.L) undervalued or overvalued?

With the current market price at $128.50, 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 De La Rue PLC'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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.79 1.11
Cost of equity 8.7% 12.7%
Cost of debt 8.3% 15.8%
Tax rate 10.6% 18.1%
Debt/Equity ratio 0.51 0.51
After-tax WACC 8.3% 12.8%

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: 10.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $310 (FY03-2024) to $316 (FY03-2034)
  • Net profit margin expansion from -6% to 2%
  • Capital expenditures maintained at approximately 7% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $14 $148M 67.6%
10-Year Growth $26 $172M 50.8%
5-Year EBITDA $(1,234) $118M 59.3%
10-Year EBITDA $7 $136M 37.5%

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: 10.7%
  • Long-term growth rate: 3.5%
  • Fair value: $7.13 (-94.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.7% (Low) to 8.7% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $(55) to $(171)
  • Selected fair value: $-112.89 (-187.9% 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 $74M
Discount Rate (WACC) 12.8% - 8.3%
Enterprise Value $579M - $896M
Net Debt $121M
Equity Value $458M - $775M
Outstanding Shares 2M
Fair Value $232 - $393
Selected Fair Value $312.74

Key Financial Metrics

Metric Value
Market Capitalization $253M
Enterprise Value $375M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 3.45
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 0.51

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) 35% $7.77
Discounted Cash Flow (5Y) 29% $3.39
Dividend Discount Model (Multi-Stage) 24% $1.43
Earnings Power Value 12% $31.27
Weighted Average 100% $51.60

Investment Conclusion

Based on our comprehensive valuation analysis, De La Rue PLC's weighted average intrinsic value is $51.60, which is approximately 59.8% below the current market price of $128.50.

Key investment considerations:

  • Strong projected earnings growth (-6% to 2% margin)
  • Consistent cash flow generation

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