What is FTCH's Intrinsic value?

Farfetch Ltd (FTCH) Intrinsic Value Analysis

Executive Summary

As of June 9, 2025, Farfetch Ltd's estimated intrinsic value ranges from $7.51 to $7.51 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $7.51 +1069.1%

Is Farfetch Ltd (FTCH) undervalued or overvalued?

With the current market price at $0.64, 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 Farfetch Ltd'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 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 3.65 4.85
Cost of equity 22.4% 34.3%
Cost of debt 7.0% 7.0%
Tax rate 0.4% 0.7%
Debt/Equity ratio 4.89 4.89
After-tax WACC 9.6% 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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 28.3%
  • Long-term growth rate: 4.0%
  • Fair value: $7.51 (1069.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 34.3% (Low) to 22.4% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $(6) to $(13)
  • Selected fair value: $-9.34 (-1553.7% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $227M
Enterprise Value $926M
Trailing P/E 0.00
Forward P/E 0.54
Trailing EV/EBITDA 5.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 4.89

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) 100% $1.50
Weighted Average 100% $7.51

Investment Conclusion

Based on our comprehensive valuation analysis, Farfetch Ltd's weighted average intrinsic value is $7.51, which is approximately 1069.1% above the current market price of $0.64.

Key investment considerations:

  • Strong projected earnings growth (15% to 29% margin)
  • Consistent cash flow generation

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