What is GOG.L's Intrinsic value?

Go-Ahead Group PLC (GOG.L) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Go-Ahead Group PLC's estimated intrinsic value ranges from $134.17 to $36434.57 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $134.17 -91.3%
Discounted Cash Flow (5Y) $1218.65 -21.2%
Earnings Power Value $36434.57 +2256.7%

Is Go-Ahead Group PLC (GOG.L) undervalued or overvalued?

With the current market price at $1546.00, 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 Go-Ahead Group PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. 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 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.7 0.89
Cost of equity 8.2% 11.2%
Cost of debt 4.0% 5.2%
Tax rate 24.0% 26.5%
Debt/Equity ratio 1.06 1.06
After-tax WACC 5.6% 7.4%

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: 6.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $4,058 (FY07-2021) to $1,824 (FY07-2031)
  • Net profit margin expansion from -1% to 0%
  • Capital expenditures maintained at approximately 3% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $1,219 $614M 78.7%
10-Year Growth $134 $146M 8.0%
5-Year EBITDA $356 $242M 46.0%
10-Year EBITDA $264 $202M 33.4%

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 $1,004M
Discount Rate (WACC) 7.4% - 5.6%
Enterprise Value $13,554M - $18,086M
Net Debt $88M
Equity Value $13,466M - $17,997M
Outstanding Shares 0M
Fair Value $31,187 - $41,683
Selected Fair Value $36434.57

Key Financial Metrics

Metric Value
Market Capitalization $668M
Enterprise Value $756M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 2.30
Current Dividend Yield 832.15%
Dividend Growth Rate (5Y) -100.00%
Debt-to-Equity Ratio 1.06

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) 46% $40.25
Discounted Cash Flow (5Y) 38% $304.66
Earnings Power Value 15% $3643.46
Weighted Average 100% $6135.96

Investment Conclusion

Based on our comprehensive valuation analysis, Go-Ahead Group PLC's weighted average intrinsic value is $6135.96, which is approximately 296.9% above the current market price of $1546.00.

Key investment considerations:

  • Strong projected earnings growth (-1% to 0% margin)
  • Consistent cash flow generation

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