What is ENB.TO's Intrinsic value?

Enbridge Inc (ENB.TO) Intrinsic Value Analysis

Executive Summary

As of June 19, 2025, Enbridge Inc's estimated intrinsic value ranges from $23.03 to $95.19 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $95.19 +51.7%
Discounted Cash Flow (5Y) $61.14 -2.6%
Dividend Discount Model (Multi-Stage) $66.74 +6.4%
Dividend Discount Model (Stable) $38.77 -38.2%
Earnings Power Value $23.03 -63.3%

Is Enbridge Inc (ENB.TO) undervalued or overvalued?

With the current market price at $62.75, the stock appears to be fairly valued.

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 Enbridge 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 0.64 0.75
Cost of equity 6.4% 8.7%
Cost of debt 4.2% 6.3%
Tax rate 21.1% 23.0%
Debt/Equity ratio 0.74 0.74
After-tax WACC 5.1% 7.1%

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: 6.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $53,473 (FY12-2024) to $108,327 (FY12-2034)
  • Net profit margin expansion from 11% to 15%
  • Capital expenditures maintained at approximately 13% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $61 $234,303M 80.6%
10-Year Growth $95 $308,538M 66.9%
5-Year EBITDA $59 $229,561M 80.2%
10-Year EBITDA $89 $295,146M 65.4%

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: 133.2%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.6%
  • Long-term growth rate: 1.0%
  • Fair value: $66.74 (6.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.7% (Low) to 6.4% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $25 to $53
  • Selected fair value: $38.77 (-38.2% 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 $8,955M
Discount Rate (WACC) 7.1% - 5.1%
Enterprise Value $126,627M - $175,832M
Net Debt $101,026M
Equity Value $25,601M - $74,806M
Outstanding Shares 2,180M
Fair Value $12 - $34
Selected Fair Value $23.03

Key Financial Metrics

Metric Value
Market Capitalization $136798M
Enterprise Value $237824M
Trailing P/E 21.74
Forward P/E 20.08
Trailing EV/EBITDA 9.25
Current Dividend Yield 606.59%
Dividend Growth Rate (5Y) 4.46%
Debt-to-Equity Ratio 0.74

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% $28.56
Discounted Cash Flow (5Y) 25% $15.28
Dividend Discount Model (Multi-Stage) 20% $13.35
Dividend Discount Model (Stable) 15% $5.82
Earnings Power Value 10% $2.30
Weighted Average 100% $65.31

Investment Conclusion

Based on our comprehensive valuation analysis, Enbridge Inc's weighted average intrinsic value is $65.31, which is approximately 4.1% above the current market price of $62.75.

Key investment considerations:

  • Strong projected earnings growth (11% to 15% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 4.46%

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