What is GBDC's Intrinsic value?

Golub Capital BDC Inc (GBDC) Intrinsic Value Analysis

Executive Summary

As of June 14, 2025, Golub Capital BDC Inc's estimated intrinsic value ranges from $14.32 to $22.59 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $22.59 +53.8%
Discounted Cash Flow (5Y) $14.32 -2.5%
Dividend Discount Model (Multi-Stage) $17.92 +22.0%
Dividend Discount Model (Stable) $15.89 +8.2%

Is Golub Capital BDC Inc (GBDC) undervalued or overvalued?

With the current market price at $14.69, 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 Golub Capital BDC Inc'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

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 0.91
Cost of equity 7.3% 10.0%
Cost of debt 4.0% 9.1%
Tax rate 0.1% 0.2%
Debt/Equity ratio 1.18 1.18
After-tax WACC 5.5% 9.5%

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: 7.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $725 (FY09-2024) to $1,468 (FY09-2034)
  • Net profit margin expansion from 38% to 38%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $14 $8,290M 78.1%
10-Year Growth $23 $10,494M 63.6%
5-Year EBITDA $9 $6,793M 73.3%
10-Year EBITDA $17 $8,962M 57.4%

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: 139.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.6%
  • Long-term growth rate: 2.0%
  • Fair value: $17.92 (22.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.0% (Low) to 7.3% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $9 to $23
  • Selected fair value: $15.89 (8.2% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $3913M
Enterprise Value $8389M
Trailing P/E 13.28
Forward P/E 11.58
Trailing EV/EBITDA 14.10
Current Dividend Yield 1053.47%
Dividend Growth Rate (5Y) 25.48%
Debt-to-Equity Ratio 1.18

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) 33% $6.78
Discounted Cash Flow (5Y) 28% $3.58
Dividend Discount Model (Multi-Stage) 22% $3.58
Dividend Discount Model (Stable) 17% $2.38
Weighted Average 100% $18.14

Investment Conclusion

Based on our comprehensive valuation analysis, Golub Capital BDC Inc's weighted average intrinsic value is $18.14, which is approximately 23.5% above the current market price of $14.69.

Key investment considerations:

  • Strong projected earnings growth (38% to 38% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 25.48%

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