What is FRMO's Intrinsic value?

FRMO Corp (FRMO) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, FRMO Corp's estimated intrinsic value ranges from $1.86 to $101.44 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $25.02 +199.3%
Dividend Discount Model (Stable) $101.44 +1113.4%
Earnings Power Value $1.86 -77.8%

Is FRMO Corp (FRMO) undervalued or overvalued?

With the current market price at $8.36, 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 FRMO Corp's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  2. 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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.83 0.95
Cost of equity 7.7% 10.2%
Cost of debt 4.5% 16.4%
Tax rate 8.0% 10.9%
Debt/Equity ratio 0 0
After-tax WACC 7.7% 10.2%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.9%
  • Long-term growth rate: 4.0%
  • Fair value: $25.02 (199.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.2% (Low) to 7.7% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $46 to $157
  • Selected fair value: $101.44 (1113.4% 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 $4M
Discount Rate (WACC) 10.2% - 7.7%
Enterprise Value $35M - $46M
Net Debt $(41)M
Equity Value $76M - $87M
Outstanding Shares 44M
Fair Value $2 - $2
Selected Fair Value $1.86

Key Financial Metrics

Metric Value
Market Capitalization $368M
Enterprise Value $327M
Trailing P/E 1.78
Forward P/E 5.10
Trailing EV/EBITDA 27.55
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.00

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) 44% $5.00
Dividend Discount Model (Stable) 33% $15.22
Earnings Power Value 22% $0.19
Weighted Average 100% $45.35

Investment Conclusion

Based on our comprehensive valuation analysis, FRMO Corp's weighted average intrinsic value is $45.35, which is approximately 442.4% above the current market price of $8.36.

Key investment considerations:

  • Strong projected earnings growth (1432% to 1503% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.00)

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