What is EPIC.CN's Intrinsic value?

Leviathan Natural Products (EPIC.CN) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Leviathan Natural Products's estimated intrinsic value ranges from $0.25 to $0.64 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $0.64 +94.1%
Discounted Cash Flow (5Y) $0.34 +3.0%
Dividend Discount Model (Multi-Stage) $0.41 +24.4%
Dividend Discount Model (Stable) $0.25 -24.5%

Is Leviathan Natural Products (EPIC.CN) undervalued or overvalued?

With the current market price at $0.33, 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 Leviathan Natural Products'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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.64 0.83
Cost of equity 6.4% 9.2%
Cost of debt 5.0% 5.0%
Tax rate 25.9% 26.5%
Debt/Equity ratio 0.2 0.2
After-tax WACC 6.0% 8.3%

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: 7.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $57 (FY08-2024) to $91 (FY08-2034)
  • Net profit margin expansion from 1% to 7%
  • Capital expenditures maintained at approximately 11% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $0 $43M 88.8%
10-Year Growth $1 $78M 73.6%
5-Year EBITDA $1 $128M 96.3%
10-Year EBITDA $1 $146M 85.9%

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: 7.8%
  • Long-term growth rate: 2.0%
  • Fair value: $0.41 (24.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.2% (Low) to 6.4% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $0 to $0
  • Selected fair value: $0.25 (-24.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $39M
Enterprise Value $41M
Trailing P/E 23.12
Forward P/E 30.14
Trailing EV/EBITDA 13.65
Current Dividend Yield 62.96%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.20

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% $0.19
Discounted Cash Flow (5Y) 28% $0.08
Dividend Discount Model (Multi-Stage) 22% $0.08
Dividend Discount Model (Stable) 17% $0.04
Weighted Average 100% $0.44

Investment Conclusion

Based on our comprehensive valuation analysis, Leviathan Natural Products's weighted average intrinsic value is $0.44, which is approximately 33.6% above the current market price of $0.33.

Key investment considerations:

  • Strong projected earnings growth (1% to 7% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.20)

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