As of June 3, 2025, Freehold Royalties Ltd's estimated intrinsic value ranges from $10.35 to $17.25 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $10.35 | -14.1% |
| Discounted Cash Flow (5Y) | $10.38 | -13.8% |
| Dividend Discount Model (Multi-Stage) | $10.76 | -10.7% |
| Dividend Discount Model (Stable) | $10.92 | -9.3% |
| Earnings Power Value | $17.25 | +43.3% |
Is Freehold Royalties Ltd (FRU.TO) undervalued or overvalued?
With the current market price at $12.04, the stock appears to be fairly valued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Freehold Royalties Ltd's intrinsic value, including:
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 | 1.42 | 1.52 |
| Cost of equity | 10.4% | 13.4% |
| Cost of debt | 4.0% | 6.5% |
| Tax rate | 22.1% | 22.7% |
| Debt/Equity ratio | 0.15 | 0.15 |
| After-tax WACC | 9.4% | 12.3% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $10 | $1,997M | 71.8% |
| 10-Year Growth | $10 | $1,992M | 50.6% |
| 5-Year EBITDA | $7 | $1,452M | 61.2% |
| 10-Year EBITDA | $8 | $1,608M | 38.8% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $333M |
| Discount Rate (WACC) | 12.3% - 9.4% |
| Enterprise Value | $2,711M - $3,539M |
| Net Debt | $296M |
| Equity Value | $2,415M - $3,243M |
| Outstanding Shares | 164M |
| Fair Value | $15 - $20 |
| Selected Fair Value | $17.25 |
| Metric | Value |
|---|---|
| Market Capitalization | $1974M |
| Enterprise Value | $2270M |
| Trailing P/E | 12.92 |
| Forward P/E | 12.61 |
| Trailing EV/EBITDA | 7.05 |
| Current Dividend Yield | 842.56% |
| Dividend Growth Rate (5Y) | 42.74% |
| Debt-to-Equity Ratio | 0.15 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $3.10 |
| Discounted Cash Flow (5Y) | 25% | $2.59 |
| Dividend Discount Model (Multi-Stage) | 20% | $2.15 |
| Dividend Discount Model (Stable) | 15% | $1.64 |
| Earnings Power Value | 10% | $1.73 |
| Weighted Average | 100% | $11.21 |
Based on our comprehensive valuation analysis, Freehold Royalties Ltd's weighted average intrinsic value is $11.21, which is approximately 6.9% below the current market price of $12.04.
Key investment considerations:
Given these factors, we believe Freehold Royalties Ltd is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.