What is EAT.L's Intrinsic value?

European Assets Trust PLC (EAT.L) Intrinsic Value Analysis

Executive Summary

As of June 5, 2025, European Assets Trust PLC's estimated intrinsic value ranges from $41.01 to $57.68 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $51.69 -40.9%
Discounted Cash Flow (5Y) $49.81 -43.0%
Dividend Discount Model (Multi-Stage) $57.68 -34.0%
Dividend Discount Model (Stable) $41.01 -53.1%

Is European Assets Trust PLC (EAT.L) undervalued or overvalued?

With the current market price at $87.40, 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 European Assets Trust 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

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 0.84 0.95
Cost of equity 9.0% 11.6%
Cost of debt 4.0% 4.6%
Tax rate 0.8% 1.3%
Debt/Equity ratio 0.08 0.08
After-tax WACC 8.6% 11.0%

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: 9.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $19 (FY12-2024) to $26 (FY12-2034)
  • Net profit margin expansion from 70% to 73%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $50 $192M 67.9%
10-Year Growth $52 $199M 46.9%
5-Year EBITDA $36 $144M 57.0%
10-Year EBITDA $42 $164M 35.6%

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: 196.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 10.3%
  • Long-term growth rate: 2.0%
  • Fair value: $57.68 (-34.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 11.6% (Low) to 9.0% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $25 to $57
  • Selected fair value: $41.01 (-53.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $309M
Enterprise Value $325M
Trailing P/E 23.03
Forward P/E 21.10
Trailing EV/EBITDA 8.10
Current Dividend Yield 850.85%
Dividend Growth Rate (5Y) -4.11%
Debt-to-Equity Ratio 0.09

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) 33% $15.51
Discounted Cash Flow (5Y) 28% $12.45
Dividend Discount Model (Multi-Stage) 22% $11.54
Dividend Discount Model (Stable) 17% $6.15
Weighted Average 100% $50.72

Investment Conclusion

Based on our comprehensive valuation analysis, European Assets Trust PLC's weighted average intrinsic value is $50.72, which is approximately 42.0% below the current market price of $87.40.

Key investment considerations:

  • Strong projected earnings growth (70% to 73% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.09)

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