What is ENQ.L's Intrinsic value?

EnQuest PLC (ENQ.L) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, EnQuest PLC's estimated intrinsic value ranges from $14.43 to $257.78 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $91.23 +651.4%
Discounted Cash Flow (5Y) $82.12 +576.4%
Dividend Discount Model (Multi-Stage) $14.47 +19.2%
Dividend Discount Model (Stable) $14.43 +18.9%
Earnings Power Value $257.78 +2023.4%

Is EnQuest PLC (ENQ.L) undervalued or overvalued?

With the current market price at $12.14, 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 EnQuest 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
  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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 2.59 3.2
Cost of equity 19.5% 27.3%
Cost of debt 5.2% 5.7%
Tax rate 13.8% 27.7%
Debt/Equity ratio 3.37 3.37
After-tax WACC 7.9% 9.4%

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: 8.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $1,181 (FY12-2024) to $1,507 (FY12-2034)
  • Net profit margin expansion from 8% to 12%
  • Capital expenditures maintained at approximately 12% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $109 $2,702M 67.2%
10-Year Growth $121 $2,922M 46.7%
5-Year EBITDA $32 $1,309M 32.4%
10-Year EBITDA $63 $1,871M 16.8%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 23.4%
  • Long-term growth rate: 0.5%
  • Fair value: $14.47 (19.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 27.3% (Low) to 19.5% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $13 to $25
  • Selected fair value: $14.43 (18.9% 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 $598M
Discount Rate (WACC) 9.4% - 7.9%
Enterprise Value $6,333M - $7,550M
Net Debt $720M
Equity Value $5,613M - $6,830M
Outstanding Shares 18M
Fair Value $309 - $376
Selected Fair Value $257.78

Key Financial Metrics

Metric Value
Market Capitalization $221M
Enterprise Value $763M
Trailing P/E 3.12
Forward P/E 2.02
Trailing EV/EBITDA 1.50
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 3.37

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% $27.37
Discounted Cash Flow (5Y) 25% $20.53
Dividend Discount Model (Multi-Stage) 20% $2.89
Dividend Discount Model (Stable) 15% $2.16
Earnings Power Value 10% $25.78
Weighted Average 100% $78.73

Investment Conclusion

Based on our comprehensive valuation analysis, EnQuest PLC's weighted average intrinsic value is $78.73, which is approximately 548.5% above the current market price of $12.14.

Key investment considerations:

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

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