What is EBF's Intrinsic value?

Ennis Inc (EBF) Intrinsic Value Analysis

Executive Summary

As of June 13, 2025, Ennis Inc's estimated intrinsic value ranges from $18.92 to $37.22 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $31.97 +69.6%
Discounted Cash Flow (5Y) $30.12 +59.8%
Dividend Discount Model (Multi-Stage) $26.45 +40.3%
Dividend Discount Model (Stable) $18.92 +0.3%
Earnings Power Value $37.22 +97.5%

Is Ennis Inc (EBF) undervalued or overvalued?

With the current market price at $18.85, 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 Ennis 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.62 0.93
Cost of equity 6.7% 10.1%
Cost of debt 5.0% 5.0%
Tax rate 27.5% 27.8%
Debt/Equity ratio 1 1
After-tax WACC 5.2% 6.8%

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: 6.0% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $395 (FY02-2025) to $529 (FY02-2035)
  • Net profit margin expansion from 10% to 10%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $30 $718M 78.7%
10-Year Growth $32 $766M 62.6%
5-Year EBITDA $19 $428M 64.4%
10-Year EBITDA $23 $522M 45.1%

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: 229.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.4%
  • Long-term growth rate: 1.0%
  • Fair value: $26.45 (40.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.1% (Low) to 6.7% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $11 to $27
  • Selected fair value: $18.92 (0.3% 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 $53M
Discount Rate (WACC) 6.8% - 5.2%
Enterprise Value $777M - $1,028M
Net Debt $(67)M
Equity Value $844M - $1,095M
Outstanding Shares 26M
Fair Value $32 - $42
Selected Fair Value $37.22

Key Financial Metrics

Metric Value
Market Capitalization $491M
Enterprise Value $424M
Trailing P/E 12.27
Forward P/E 11.82
Trailing EV/EBITDA 5.85
Current Dividend Yield 1903.87%
Dividend Growth Rate (5Y) 40.71%
Debt-to-Equity Ratio 1.08

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% $9.59
Discounted Cash Flow (5Y) 25% $7.53
Dividend Discount Model (Multi-Stage) 20% $5.29
Dividend Discount Model (Stable) 15% $2.84
Earnings Power Value 10% $3.72
Weighted Average 100% $28.97

Investment Conclusion

Based on our comprehensive valuation analysis, Ennis Inc's weighted average intrinsic value is $28.97, which is approximately 53.7% above the current market price of $18.85.

Key investment considerations:

  • Strong projected earnings growth (10% to 10% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 40.71%

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