What is EKT.MC's Intrinsic value?

Euskaltel SA (EKT.MC) Intrinsic Value Analysis

Executive Summary

As of June 22, 2025, Euskaltel SA's estimated intrinsic value ranges from $4.83 to $15.61 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $8.51 -22.2%
Discounted Cash Flow (5Y) $6.18 -43.5%
Dividend Discount Model (Multi-Stage) $7.12 -34.9%
Dividend Discount Model (Stable) $4.83 -55.9%
Earnings Power Value $15.61 +42.7%

Is Euskaltel SA (EKT.MC) undervalued or overvalued?

With the current market price at $10.94, 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 Euskaltel SA'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 2.8% 3.3%
Equity market risk premium 6.3% 7.3%
Adjusted beta 0.79 0.88
Cost of equity 7.7% 10.2%
Cost of debt 4.0% 12.2%
Tax rate 19.3% 21.0%
Debt/Equity ratio 0.75 0.75
After-tax WACC 5.8% 10.0%

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: 7.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $678 (FY12-2020) to $1,447 (FY12-2030)
  • Net profit margin expansion from 12% to 8%
  • Capital expenditures maintained at approximately 22% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $6 $2,501M 80.4%
10-Year Growth $9 $2,917M 65.7%
5-Year EBITDA $3 $1,942M 74.8%
10-Year EBITDA $6 $2,418M 58.6%

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: 267.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.0%
  • Long-term growth rate: 3.0%
  • Fair value: $7.12 (-34.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.2% (Low) to 7.7% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $3 to $7
  • Selected fair value: $4.83 (-55.9% 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 $307M
Discount Rate (WACC) 10.0% - 5.8%
Enterprise Value $3,080M - $5,286M
Net Debt $1,397M
Equity Value $1,683M - $3,889M
Outstanding Shares 178M
Fair Value $9 - $22
Selected Fair Value $15.61

Key Financial Metrics

Metric Value
Market Capitalization $1953M
Enterprise Value $3350M
Trailing P/E 36.99
Forward P/E 33.47
Trailing EV/EBITDA 5.85
Current Dividend Yield 722.34%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.75

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% $2.55
Discounted Cash Flow (5Y) 25% $1.55
Dividend Discount Model (Multi-Stage) 20% $1.42
Dividend Discount Model (Stable) 15% $0.72
Earnings Power Value 10% $1.56
Weighted Average 100% $7.81

Investment Conclusion

Based on our comprehensive valuation analysis, Euskaltel SA's weighted average intrinsic value is $7.81, which is approximately 28.6% below the current market price of $10.94.

Key investment considerations:

  • Strong projected earnings growth (12% to 8% margin)
  • Consistent cash flow generation

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