What is FAG.ST's Intrinsic value?

Fagerhult AB (FAG.ST) Intrinsic Value Analysis

Executive Summary

As of June 10, 2025, Fagerhult AB's estimated intrinsic value ranges from $29.54 to $63.46 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $56.13 +26.8%
Discounted Cash Flow (5Y) $55.25 +24.9%
Dividend Discount Model (Multi-Stage) $31.11 -29.7%
Dividend Discount Model (Stable) $29.54 -33.2%
Earnings Power Value $63.46 +43.4%

Is Fagerhult AB (FAG.ST) undervalued or overvalued?

With the current market price at $44.25, 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 Fagerhult AB'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 2.5% 3.0%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.93 1.09
Cost of equity 7.2% 10.2%
Cost of debt 4.0% 4.5%
Tax rate 27.7% 30.2%
Debt/Equity ratio 0.51 0.51
After-tax WACC 5.8% 7.8%

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: 6.8% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $8,305 (FY12-2024) to $13,476 (FY12-2034)
  • Net profit margin expansion from 4% to 5%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $55 $11,937M 84.2%
10-Year Growth $56 $12,093M 69.9%
5-Year EBITDA $33 $8,012M 76.5%
10-Year EBITDA $40 $9,293M 60.8%

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: 8.7%
  • Long-term growth rate: 3.0%
  • Fair value: $31.11 (-29.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.2% (Low) to 7.2% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $14 to $45
  • Selected fair value: $29.54 (-33.2% 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 $890M
Discount Rate (WACC) 7.8% - 5.8%
Enterprise Value $11,403M - $15,382M
Net Debt $2,148M
Equity Value $9,255M - $13,234M
Outstanding Shares 177M
Fair Value $52 - $75
Selected Fair Value $63.46

Key Financial Metrics

Metric Value
Market Capitalization $7841M
Enterprise Value $9988M
Trailing P/E 27.19
Forward P/E 20.01
Trailing EV/EBITDA 8.15
Current Dividend Yield 145.48%
Dividend Growth Rate (5Y) 166.34%
Debt-to-Equity Ratio 0.51

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% $16.84
Discounted Cash Flow (5Y) 25% $13.81
Dividend Discount Model (Multi-Stage) 20% $6.22
Dividend Discount Model (Stable) 15% $4.43
Earnings Power Value 10% $6.35
Weighted Average 100% $47.65

Investment Conclusion

Based on our comprehensive valuation analysis, Fagerhult AB's weighted average intrinsic value is $47.65, which is approximately 7.7% above the current market price of $44.25.

Key investment considerations:

  • Strong projected earnings growth (4% to 5% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 166.34%

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