What is FPL's Intrinsic value?

First Trust New Opportunities MLP & Energy Fund (FPL) Intrinsic Value Analysis

Executive Summary

As of June 21, 2025, First Trust New Opportunities MLP & Energy Fund's estimated intrinsic value ranges from $5.83 to $13.82 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $5.83 -24.8%
Dividend Discount Model (Stable) $13.82 +78.1%

Is First Trust New Opportunities MLP & Energy Fund (FPL) undervalued or overvalued?

With the current market price at $7.76, the stock appears to be moderately 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 First Trust New Opportunities MLP & Energy Fund's intrinsic value, including:

  1. 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.75 0.98
Cost of equity 7.3% 10.3%
Cost of debt 4.5% 23.9%
Tax rate 29.7% 30.6%
Debt/Equity ratio 0.25 0.25
After-tax WACC 6.5% 11.6%

Valuation Methods

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: 79.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.8%
  • Long-term growth rate: 4.0%
  • Fair value: $5.83 (-24.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.3% (Low) to 7.3% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $5 to $22
  • Selected fair value: $13.82 (78.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $182M
Enterprise Value $227M
Trailing P/E 13.59
Forward P/E 23.31
Trailing EV/EBITDA 34.90
Current Dividend Yield 587.45%
Dividend Growth Rate (5Y) -17.79%
Debt-to-Equity Ratio 0.25

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
Dividend Discount Model (Multi-Stage) 57% $1.17
Dividend Discount Model (Stable) 43% $2.07
Weighted Average 100% $9.26

Investment Conclusion

Based on our comprehensive valuation analysis, First Trust New Opportunities MLP & Energy Fund's weighted average intrinsic value is $9.26, which is approximately 19.3% above the current market price of $7.76.

Key investment considerations:

  • Strong projected earnings growth (291% to 175% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.25)

Given these factors, we believe First Trust New Opportunities MLP & Energy Fund is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.