What is DXT.TO's Intrinsic value?

Dexterra Group Inc (DXT.TO) Intrinsic Value Analysis

Executive Summary

As of May 24, 2025, Dexterra Group Inc's estimated intrinsic value ranges from $6.10 to $27.37 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $16.26 +89.7%
Discounted Cash Flow (5Y) $13.32 +55.4%
Dividend Discount Model (Multi-Stage) $8.72 +1.8%
Dividend Discount Model (Stable) $6.10 -28.9%
Earnings Power Value $27.37 +219.3%

Is Dexterra Group Inc (DXT.TO) undervalued or overvalued?

With the current market price at $8.57, 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 Dexterra Group Inc'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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.66 0.85
Cost of equity 6.5% 9.3%
Cost of debt 4.2% 8.8%
Tax rate 21.1% 25.2%
Debt/Equity ratio 0.16 0.16
After-tax WACC 6.1% 8.9%

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: 7.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,003 (FY12-2024) to $1,615 (FY12-2034)
  • Net profit margin expansion from 4% to 4%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $13 $931M 71.7%
10-Year Growth $16 $1,115M 54.7%
5-Year EBITDA $11 $780M 66.2%
10-Year EBITDA $14 $957M 47.2%

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: 69.7%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.9%
  • Long-term growth rate: 0.5%
  • Fair value: $8.72 (1.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 6.5% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $4 to $8
  • Selected fair value: $6.10 (-28.9% 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 $131M
Discount Rate (WACC) 8.9% - 6.1%
Enterprise Value $1,467M - $2,151M
Net Debt $99M
Equity Value $1,368M - $2,052M
Outstanding Shares 62M
Fair Value $22 - $33
Selected Fair Value $27.37

Key Financial Metrics

Metric Value
Market Capitalization $535M
Enterprise Value $635M
Trailing P/E 16.70
Forward P/E 12.68
Trailing EV/EBITDA 7.50
Current Dividend Yield 413.52%
Dividend Growth Rate (5Y) 46.30%
Debt-to-Equity Ratio 0.16

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) 30% $4.88
Discounted Cash Flow (5Y) 25% $3.33
Dividend Discount Model (Multi-Stage) 20% $1.74
Dividend Discount Model (Stable) 15% $0.91
Earnings Power Value 10% $2.74
Weighted Average 100% $13.60

Investment Conclusion

Based on our comprehensive valuation analysis, Dexterra Group Inc's weighted average intrinsic value is $13.60, which is approximately 58.7% above the current market price of $8.57.

Key investment considerations:

  • Strong projected earnings growth (4% to 4% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.16)
  • Historical dividend growth of 46.30%

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