What is GLOB's Intrinsic value?

Globant SA (GLOB) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Globant SA's estimated intrinsic value ranges from $65.51 to $306.97 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $306.97 +210.4%
Discounted Cash Flow (5Y) $186.75 +88.8%
Dividend Discount Model (Multi-Stage) $181.04 +83.1%
Dividend Discount Model (Stable) $65.51 -33.8%
Earnings Power Value $71.98 -27.2%

Is Globant SA (GLOB) undervalued or overvalued?

With the current market price at $98.90, 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 Globant SA'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
  3. 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 0.81 0.93
Cost of equity 7.6% 10.1%
Cost of debt 4.5% 6.5%
Tax rate 21.5% 22.6%
Debt/Equity ratio 0.09 0.09
After-tax WACC 7.3% 9.7%

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: 8.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,416 (FY12-2024) to $6,088 (FY12-2034)
  • Net profit margin expansion from 7% to 20%
  • Capital expenditures maintained at approximately 6% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $187 $8,514M 82.5%
10-Year Growth $307 $13,810M 70.3%
5-Year EBITDA $237 $10,742M 86.1%
10-Year EBITDA $328 $14,741M 72.2%

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: 8.8%
  • Long-term growth rate: 3.5%
  • Fair value: $181.04 (83.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.1% (Low) to 7.6% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $32 to $99
  • Selected fair value: $65.51 (-33.8% 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 $287M
Discount Rate (WACC) 9.7% - 7.3%
Enterprise Value $2,969M - $3,948M
Net Debt $288M
Equity Value $2,681M - $3,660M
Outstanding Shares 44M
Fair Value $61 - $83
Selected Fair Value $71.98

Key Financial Metrics

Metric Value
Market Capitalization $4357M
Enterprise Value $4645M
Trailing P/E 28.79
Forward P/E 18.24
Trailing EV/EBITDA 13.45
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.09

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) 30% $92.09
Discounted Cash Flow (5Y) 25% $46.69
Dividend Discount Model (Multi-Stage) 20% $36.21
Dividend Discount Model (Stable) 15% $9.83
Earnings Power Value 10% $7.20
Weighted Average 100% $192.01

Investment Conclusion

Based on our comprehensive valuation analysis, Globant SA's weighted average intrinsic value is $192.01, which is approximately 94.1% above the current market price of $98.90.

Key investment considerations:

  • Strong projected earnings growth (7% to 20% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.09)

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