As of May 29, 2025, Gem Diamonds Ltd's estimated intrinsic value ranges from $8.11 to $45.69 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $43.81 | +462.4% |
| Discounted Cash Flow (5Y) | $45.69 | +486.6% |
| Dividend Discount Model (Multi-Stage) | $11.90 | +52.8% |
| Dividend Discount Model (Stable) | $8.11 | +4.1% |
| Earnings Power Value | $36.00 | +362.2% |
Is Gem Diamonds Ltd (GEMD.L) undervalued or overvalued?
With the current market price at $7.79, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Gem Diamonds 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 | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 1.53 | 1.89 |
| Cost of equity | 13.2% | 18.2% |
| Cost of debt | 6.2% | 18.0% |
| Tax rate | 32.0% | 34.8% |
| Debt/Equity ratio | 1.67 | 1.67 |
| After-tax WACC | 7.6% | 14.1% |
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 | $62 | $112M | 41.5% |
| 10-Year Growth | $59 | $108M | 23.6% |
| 5-Year EBITDA | $149 | $240M | 72.9% |
| 10-Year EBITDA | $122 | $201M | 59.1% |
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 | $9M |
| Discount Rate (WACC) | 14.1% - 7.6% |
| Enterprise Value | $64M - $120M |
| Net Debt | $20M |
| Equity Value | $44M - $100M |
| Outstanding Shares | 1M |
| Fair Value | $30 - $68 |
| Selected Fair Value | $36.00 |
| Metric | Value |
|---|---|
| Market Capitalization | $12M |
| Enterprise Value | $26M |
| Trailing P/E | 5.41 |
| Forward P/E | 2.58 |
| Trailing EV/EBITDA | 6.00 |
| Current Dividend Yield | 0.00% |
| Dividend Growth Rate (5Y) | -12.33% |
| Debt-to-Equity Ratio | 1.67 |
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% | $13.14 |
| Discounted Cash Flow (5Y) | 25% | $11.42 |
| Dividend Discount Model (Multi-Stage) | 20% | $2.38 |
| Dividend Discount Model (Stable) | 15% | $1.22 |
| Earnings Power Value | 10% | $3.60 |
| Weighted Average | 100% | $31.77 |
Based on our comprehensive valuation analysis, Gem Diamonds Ltd's weighted average intrinsic value is $31.77, which is approximately 307.8% above the current market price of $7.79.
Key investment considerations:
Given these factors, we believe Gem Diamonds Ltd is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.